Eurozone inflation unexpectedly slowed last month, adding to a string of data that could make it more difficult for the European Central Bank to curb its lavish monetary stimulus later this year.
The European Union's statistics office Eurostat estimated that inflation in the 19 countries sharing the euro was 1.2 per cent year-on-year in April. Economists polled by Reuters had expected the rate to be unchanged from March's 1.3 per cent.
The weak reading follows disappointing GDP, output, export and sentiment figures, which suggest that eurozone economic growth has peaked after a five-year run and will at best slow to a more moderate level, below optimistic forecasts at the start of the year.
This comes at a sensitive time for the ECB as policymakers are debating whether to end a €2.55 trillion bond buying scheme this year, satisfied that healthy growth will eventually raise inflation back to its target of almost 2 per cent.
The ECB's bond buying was introduced more than three years ago to revive a eurozone economy that was flagging at the time and push up inflation by flooding the financial system with cash. It is due to run out at the end of September, and policymakers need to decide over the summer whether to shut the programme after several extensions.
But inflation has failed to rise for years according to expectations and in April it missed the ECB's prediction of a rate "around" 1.5 per cent for the rest of the year.
Perhaps more worryingly for the ECB, all measures of closely-watched underlying inflation fell, indicating that pressures remain weak, despite robust employment growth and a healthy wage deal in Germany, the bloc's biggest economy.
Inflation excluding volatile food and energy prices, the ECB's preferred measure, slowed to 1.1 per cent from 1.3 per cent. The rate excluding energy, food, alcohol and tobacco, an even more narrow measure often looked at by market analysts, eased to 0.7 per cent from 1 per cent.
The euro extended its recent slide on the data and bond yields fell as investors are pricing in even slower policy normalisation by the ECB. While the currency is broadly unchanged this year, it is down 3 per cent in the past three months as investors give up expectations that the ECB will tighten policy more aggressively.
The inflation slowdown comes even as crude oil prices are up around 40 per cent from a year earlier, suggesting that inflation would be even weaker with steady energy costs.
While policymakers have played down the impact of the weak growth so far, they are expected to delay their final decision until the last possible moment, assessing whether growth would stabilise or slow further.
The bloc's GDP growth slowed to 0.4 per cent in the first quarter from 0.7 per cent three months earlier and the European Commission said downside risks to growth have increased.
Still, some policymakers have argued that earlier readings were not sustainable and some moderation was always included in forecasts.
Bundesbank President Jens Weidmann, a longtime critic of the ECB's lavish policies, said that worries over the demised of the upswing were exaggerated and expectations for an ECB rate rise in mid-2019 remained realistic.