LUXEMBOURG (dpa-AFX) – In the euro zone the inflation rate has risen to a record level again. In May, consumer prices rose by 8.1 percent year-on-year, according to an initial estimate from the statistics office Eurostat in Luxembourg on Tuesday. In the previous month, the rate was still 7.4 percent. Economists had expected an average increase of only 7.8 percent.
The inflation rate in the euro area has never been so high since the introduction of the common currency as book money in 1999. Inflation has risen steadily since the summer of 2021, with record levels recently being reached. The war in Ukraine and the tough corona measures in China have recently exacerbated the upward trend in prices.
Month-on-month, consumer prices rose 0.8 percent. Economists had expected an average of 0.6 percent.
Inflation was once again driven by an extremely sharp increase in energy prices, which rose by 39.2 percent compared to the same month last year. Food and beverages were 7.5 percent more expensive than a year ago. The price surge accelerated further. The core rate of inflation, which excludes volatile energy, food and beverages, rose to 3.8 percent in May from 3.5 percent in April.
“In view of the ongoing war in Ukraine, energy prices are likely to remain high for the time being,” predicts Christoph Weil, an economist at Commerzbank. “At the same time, the range of goods is limited by the ongoing material and delivery bottlenecks, which are likely to be exacerbated by recent corona-related plant closures in China.” The resulting increase in the cost of production is now being passed on to consumers to an ever greater extent by companies. According to Commerzbank, the inflation rate should still be around six percent by the end of the year.
The medium-term inflation target of the European Central Bank (ECB) of two percent will thus be exceeded even more. a first rate hike was last signaled by central bank representatives of the ECB in July after much hesitation. In other countries – such as the USA and Great Britain – the currency holders have already raised the key interest rate significantly.
“Inflation rates are now almost at the US level, with the difference that the Fed has already initiated a turnaround in monetary policy,” said Thomas Gitzel, chief economist at VP Bank. Meanwhile, the ECB continues to buy securities and interest rates are still in negative territory. “The European monetary authorities are too late,” said Gitzel.
The highest inflation rates in the euro zone were in the Baltic States. For example, the annual rate in Estonia was 20.1 percent. Measured against the HICP, Germany has the highest rate of the three largest countries in the currency area at 8.7 percent. In Italy it was 7.3 percent and in France 5.8 percent./jsl/bgf/eas