In May, Eurozone inflation edged up to 8.10% year-over-year, marking another fresh record high. This economic figure added pressure on the European Central Bank to act on the stubbornly high price growth.
The latest result surpassed the average market estimate of 7.70%. At the same time, it accelerated from the previous 7.40% growth. Subsequently, the main upward pressure came from the upsurge of energy prices due to the impact of the Ukraine crisis.
Similarly, the headline Eurozone annual inflation advanced by 3.80%, well above the analysts’ consensus of 3.40%. It also outstripped the 3.50% jump amid the widespread price pressures in the region.
The uptick in consumer prices indicated signs that the inflation remained elevated and had not peaked. This reading has strengthened the case for the ECB to start raising borrowing costs.
Previously, President Christine Lagarde and chief economist Philip Lane have already flagged a 25 basis point increase. This sentiment is an improvement from the ECB’s minus 0.50% deposit rate in July and September.
However, policymakers and economists doubt this move will be enough to tame the Eurozone inflation. Correspondingly, other central bank governors said that a 50 basis point rate hike in July should be on the table.
Inflation ticks up across the Eurozone
In Germany, the Eurozone’s largest economy, the inflation rocketed to 7.90% YoY in May. The rate outpaced the anticipated 7.60% and expanded from the prior 7.40% upturn. Consequently, the figure marked the highest level since 1973.
Similarly, the sky-tall prices of energy products boosted the consumer price index, which hiked considerably since the war started in Ukraine.
In France, the second-largest Eurozone economy, the annual CPI accelerated to 5.20% from the forecasted 5.00%. Additionally, the figure expanded from the last 4.80% climb.
Investors now look forward to the meeting of the ECB on June 9. They expected the central bank to formally end a bond purchases scheme and would continue to signal the rate hikes.
