Inflation eurozone May 2023

  • The euro zone’s annual headline inflation rate fell to 6.1% in May from 7% in April, below the 6.3% forecast in a Reuters poll of economists.
  • Core inflation, closely monitored by the European Central Bank, fell to 5.3% from 5.6%.
  • Investors still see the ECB implementing two more rate hikes in its upcoming meetings as it tries to cool inflation to its 2% target.

People at the market for their daily shopping on April 7, 2023 in Bari, Italy. Inflation has slowed in Italy, but price pressure is still strong.

Donato Fasano | Getty Images News | Getty Images

Eurozone inflation eased more than expected in May, with flash figures showing the bloc’s annual headline inflation rate fell to 6.1% in May from 7% in April.

This is the lowest level since February 2022. Economists polled by Reuters had expected a May reading of 6.3%.

Core inflation, excluding energy and food, also fell more than expected, to 5.3% from 5.6%.

Annual inflation in Germany and France fell more than forecast in May, according to data released on Wednesday, as prices fell from the previous month. Price increases in the euro area’s largest economies are now at their lowest level in 12 months.

National prints also showed slowing inflation in Spain and Italy. Markets were little moved immediately after the eurozone announcement, with European shares trading higher and the euro fractionally higher against the US dollar and British pound.

In a speech in Hanover, the president of the European Central Bank, Christine Lagarde, said that inflation was still “too high” and that “it will remain too long”.

The ECB meets on June 15 to take its latest monetary policy decision after gradually raising its benchmark interest rate from -0.5% a year ago to 3.25% in May – the highest level since November 2008.

The ECB gave no forward guidance after its meeting in May, but stressed that underlying price pressures remained strong.

“We need to continue our hiking cycle until we are sufficiently confident that inflation is on track to return to our target in time,” Lagarde said on Thursday.

“At the same time, we need to carefully assess the strength of monetary policy’s transmission to funding conditions, the economy and inflation.”

Money markets have priced in two more 25 basis point hikes from the ECB, one in June and another in July or September, according to Reuters.

Bundesbank President Joachim Nagel said last week that he expects “several” more increases to control inflation.

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