Institution: Eurozone inflation rate may stabilize near 3% level for a period of time.

Claus Vistesen of Pantheon Macroeconomics stated in a report that the euro area inflation rate is heading towards 3% and may sustain at this level for a period of time. In March, the inflation rate rose to 2.6%, higher than the initial estimate of 2.5%. Vistesen noted that although financial markets expect the conflict in Iran to end at some point, a significant inflation shock is still brewing. Pantheon Macroeconomics predicts that, driven by energy prices, the inflation rate will reach 2.8% in April. Furthermore, while energy inflation is expected to decrease next year, core inflation is expected to rebound. Vistesen mentioned that a moderate but sustained increase in inflation could lead the European Central Bank to raise interest rates and keep them at a higher level. At the same time, a more extreme scenario could result in the ECB significantly raising interest rates, only to quickly lower them again. Pantheon Macroeconomics predicts there will be two interest rate hikes this year.