Annual inflation in the US inched lower in April, raising hopes that inflation could be on a path back to the Federal Reserve’s target of 2%.

According to a report by the Labour Department published on Wednesday, the consumer price index (CPI) rose by 0.3% in April from March, slightly shy of expectations for 0.4%. On a 12-month basis, however, the CPI increased by 3.4%, in line with estimates.

The closely-watched core inflation, which excludes food and energy prices, came in at 0.3% monthly and 3.6 % on an annual basis, both as expected. The core 12-month inflation reading was the lowest since April 2021, while the monthly increase was the smallest since December. The inflation readings are “firmer than the Fed’s inflation goals, but at least are moving in the right direction again after the backsliding seen over the prior few months”, JP Morgan’s chief economist Michael Feroli wrote.

Separately, the eurozone economy recovered as economists predicted in the first quarter of 2024, after contracting for two consecutive quarters, a report by Eurostat showed on Wednesday.

Economic output in the countries that share the euro currency expanded by 0.3% in the first quarter of this year, in line with estimates. This was a turnaround from the last two quarters of 2023, when the region’s gross domestic product contracted by 0.1%. In fact, this year’s first quarter growth was the strongest since the third quarter of 2022.

Analysts said the stronger growth indicates an improvement in productivity, clearing the way for the European Central Bank to cut interest rates, even if wage growth remains elevated.

Finally in the UK, real wages rose at their fastest pace in more than two years in the first quarter of this year, despite rising unemployment and falling job vacancies.

A report by the Office for National Statistics published on Tuesday showed that annual pay growth excluding bonuses averaged 6% between January and March, unchanged from last month.

Including bonuses, wages grew by 5.7%, also unchanged from last month. Economists had been expecting declines in both readings. The Bank of England is monitoring for any signs that Britain’s still strong wage growth could push inflation higher.

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