A market in downtown Bonn, Germany, on February 5, 2022.
Nurfoto | Nurfoto | Getty Images
Prices in the eurozone continued to rise in May, reaching an all-time high for the seventh consecutive month.
Inflation stood at 8.1% for the month, according to preliminary data from the European Bureau of Statistics on Tuesday, above the April high of 7.4% and above expectations for the month. 7.8%.
It comes after inflation impressions from several major European economies came as a surprise in recent days. German inflation (harmonized to be comparable to that of other EU countries) stood at 8.7% year-on-year in May, preliminary figures showed on Monday, significantly exceeding analysts’ expectations of 8% and marking a sharp decrease from the 7.8% observed in April.
French inflation also exceeded expectations in May to a record 5.8%, compared with 5.4% in April, while Spanish harmonized consumer prices rose by 8.5% year-on-year. May, exceeding expectations of 8.1%.
Across the eurozone, the record annual rise in consumer prices was driven by rising energy costs, which reached 39.2% (up from 37.5% in April) and a 7.5% increase in food, alcohol and tobacco prices (from 6.3%).
However, even without energy and food prices, inflation rose from 3.5% to 3.8%, Eurostat added.
Rising prices have been exacerbated in recent months by the war in Ukraine, especially food and energy costs, as exports are stalled and Western countries are struggling to reduce their dependence. of Russian gas.
EU leaders agreed on Monday afternoon to ban 90% of Russian crude oil by the end of the year, raising prices. Charles Michel, President of the European Council, said the measure would immediately affect 75% of Russian oil imports.
Inflation, which remains high not only in Europe but also in the UK, the US and beyond, is causing headaches for central banks, which are also balancing the risk of recession.
Earlier this month, European Central Bank President Christine Lagarde said she expected a rate hike at the July Central Bank meeting.
“According to the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter,” he wrote in a blog post. “If the eurozone economy were to overheat as a result of a positive demand shock, it would make sense for political rates to rise sequentially above the neutral rate.”
The Governing Council of the ECB will meet on 9 June and then on 21 July.
Goldman Sachs chief European economist Jari Stehn told CNBC on Tuesday that the Wall Street bank expects a 25 basis point hike in the ECB’s deposit rate at each of its upcoming meetings next year , going from the current rate of -0.5% to 1.5% in June. 2023. Goldman expects general inflation in the euro area to peak at 9% in September.
“But remember that much of this is due to energy prices, much of it is due to global bottlenecks, and core inflation figures, if you eliminate food and food prices. energy is around 3.5%. Growth is slightly above 2%, “Stehn said before Tuesday’s release.
“So the inflationary pressures underlying the euro area have been consolidated, so we believe that they will normalize fairly quickly, but they are not working at the same level that we are seeing in the US and the UK. where inflation is at around 6% and where central banks, or the Fed in particular, need to take a more decisive approach to tightening policy than the ECB. “