Inflation in the euro zone hit an all-time high of 8.1% for a year in May, the European Union’s statistical institute Eurostat confirmed on Friday, a figure more than four times higher than the target. set by the European Central Bank (ECB) and which should strengthen its desire to raise interest rates.
Initially associated with shortages caused by the pandemic and rising energy prices following Russia’s invasion of Ukraine, inflation gradually spread to many sectors of the economy, from food to services to daily- day consumer product.
Consumer price inflation in the 19 countries that have adopted the single currency thus jumped to 8.1% on an annual basis, a figure unchanged from the first estimate published on May 31, after +7.4% in April. Compared to April, it stood at 0.8%.
So -called core inflation, which excludes energy prices and unprocessed food, also accelerated to 4.4% from 3.9% last month. And a narrower measure that also excludes alcohol and tobacco products shows an increase of 3.8% compared to May 2021, compared to +3.5% in April.
While energy prices, which have jumped 39.1% in a year, remain the main driver of inflation, unprocessed food products show an increase of 9%, industrial products excluding energy rose 4.2% and services rose. of 3.5%.
Increase in basic interest rates
Concerned for several months with this development, the ECB announced last week that it plans to raise key interest rates by a quarter point in July and raise them again in September, a second increase that could be even greater if the inflation outlook hadn’t improved before.
Its deposit rate, currently set at -0.5%, should rise to zero or more before falling after eight years in negative territory.
Most other major central banks have already started raising their interest rates, starting with the Bank of England and the US Federal Reserve, which has caused concern among some observers that the ECB lagging behind in the fight against inflation.
The risk is the effects of second roundthat is, the propagation of rising prices throughout the economy, does not favor a long-term anchoring of inflation expectations, possibly through a wage-price spiral that is difficult to resist.
Wage increases remain relatively contained in the euro area so far, but the ECB they expect to exceed 4% this year and next, double their historical average.
The institution led by Christine Lagarde raised its inflation forecasts to 6.8% for this year, 3.5% for 2023 and 2.1% for 2024, but these projections are based on the assumption of a peak around of 7.5%, a level already exceeded last month.
Reuters
Source: Radio-Canada
