(Bloomberg) -- German inflation unexpectedly eased in April after the economy struggled at the start of 2023, adding to a mixed bag of data for the European Central Bank to ponder before next week’s interest-rate decision.

Consumer prices climbed 7.6% from a year ago — down from March’s 7.8% pace, which economists estimated would be maintained.

The statistics office attributed the slowdown in goods and services. Data earlier Friday showed Europe’s biggest economy just dodged a recession with flat first-quarter output.

A flurry of updates this week on the euro area’s health has revealed accelerating inflation for France and Spain in April, alongside modest expansion for the euro region’s 20-nation economy in the first three months of the year.

Read more: Euro Zone Avoids Recession But Inflation Picks Up

Economists predict a slower hiking pace of a quarter-point, according to a Bloomberg survey. They see two more such steps, in June and July, taking the deposit rate to a peak of 3.75%.

Much will hinge on inflation and credit dynamics. In Germany, the Bundesbank predicts price pressures will continue to slow, reflecting a drop in energy costs from last year. Extraordinarily high increases for food and other goods, as well as services, should ease too, it said in its latest monthly report, though a trend reversal has yet to start.

Money markets eased wagers on the scale of rate hikes expected next week, placing 12% odds on a quarter-point increase compared to 25% earlier. Terminal rate bets were also reduced slightly, pricing the deposit rate to climb to 3.72% by September.

What Bloomberg Economics Says...

“What happened to euro-area inflation in April could be pivotal to the ECB’s May policy decision — a big upward surprise on core inflation would put the decision over whether to hike by 25 or 50 basis points on a knife edge. ”

—Jamie Rush, chief European economist. For full note, click here

In April, food prices fell sharply from March across German federal states, which — unlike the national statistics office — have already published a detailed breakdown of their monthly data. From a year earlier, however, food remained one of the biggest inflation drivers, hurting low-income households in particular.

Private consumption, along with public spending, declined in the first quarter, when growth in investment and exports staved off a downturn. The government this week predicted 2023 expansion of 0.4%.

--With assistance from Joel Rinneby, Kristian Siedenburg and James Hirai.

(Updates with market pricing in seventh paragraph)

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