Eurozone inflation close to peak

A surge in eurozone consumer prices, propelled even higher by Russia's invasion of Ukraine, is "very close" to reaching its peak, European Central Bank vice-president Luis de Guindos said Thursday.

Eurozone inflation soared to 7.4 per cent in March, an all-time high for the currency club and well above the ECB's two-percent target.

"My assessment is that we're very close to the peak, and that we'll start to see inflation decline in the second half of the year," de Guindos told a committee of the European Parliament.

"Nevertheless, inflation will be high even in the last quarter," de Guindos said, with the ECB currently projecting a figure of four percent for the last three months of 2022.

The bank expects inflation in the eurozone to even out at 5.1 per cent over 2022.

The estimate reflected a "baseline" scenario, not taking into account the possibility of a stop to Russian gas supplies, which would have severe consequences for the European economy.

In such a scenario, the cost of energy would rise higher, driving inflation up to 7.1 per cent, the ECB predicted in March.

The Frankfurt-based institution expects the shift to other power suppliers to slowly take the pressure off energy prices.

The ECB would continue to follow "second-round effects" that could push up wages, and further boost inflation, de Guindos said.

"So far we have not seen this kind of wage dynamics," the ECB vice-president said.

"Wage increases are quite prudent and fully compatible with the target of price stability."