FRANKFURT(Reuters) – The Euro zone saw its inflation remain at a record level of 7.4% in April. It was driven by rising fuel prices and higher food costs. However, Wednesday’s statement from the EU’s statistical agency showed that it had lowered its initial estimate to 7.5%.

The past year has seen inflation skyrocket, first due to supply bottlenecks after COVID, then secondly because of knock-on effects caused by Russia’s conflict in Ukraine. This has led to an increase in prices of all industrial goods, raw materials included.

The price pressures have become so widespread that even the underlying inflation (which filters out volatile fuel and food costs) is far above the 2% goal of European Central Bank. This indicates that there is a risk that excessive price growth could be entrenched.

Eurostat reported that the inflation rate excluding food and energy accelerated to 3.9% from 3.2% March. A narrower measure filtering out alcohol or tobacco rose to 3.5%, from 3%.

The ECB seems to think that inflation has increased and will likely raise interest rates in the month of July. It is expected to start a series rate moves that would lift the minus 0.5% deposit-rate rate into positive territory prior to year end.

The ECB is becoming more concerned that inflation, which was once viewed as a “hump”, may be here to stay. It will require tighter monetary conditions in order to bring it down to 2%.

This week, the European Commission estimated that 2023’s price growth would be 2.7%. It suggests that inflation will rise well beyond what is required by the ECB for at least three consecutive years.

Politicians should also be worried about a 3.3% rise in inflation for services, which is up from 2.7%. This is because services are more labour-intensive than other sectors and thus will fuel wage pressures.

Although rapid wage growth is an important precondition for durable inflation, it can also be a backward-looking indicator that indicates how difficult it will become to control once it has begun.

Inflation in April was the highest among euro-zone members. Estonia’s rate exceeded 19%. The rate was 5.4% in France, and 5.4% in Malta.