Euro zone inflation rose to yet another record high in May, challenging the European Central Bank view that gradual interest rate increases from July will be enough to tame stubbornly high price growth.
Inflation in the 19 countries sharing the euro accelerated to 8.1% in May from 7.4% in April, beating expectations for 7.7% as price growth continued to broaden, indicating that it is no longer just energy pulling up the headline figure.
At 5.6%, Malta has the lowest rate within the bloc.
Prices have risen sharply across Europe over the past year, initially on supply chain problems after the pandemic, then on Russia’s war in Ukraine, suggesting that a new era of fast price growth is now sweeping away a decade of ultra low inflation.
Though headline inflation is now 4 times the ECB’s 2% target, ECB policymakers may be more worried by the rapid rise in underlying prices, which indicate that what was once seen a transitory jump in prices is now getting embedded.
Inflation excluding food and energy prices, watched closely by the ECB, accelerated to 4.4% ear-on-year from 3.9% while an even narrower measure, that also excludes alcohol and tobacco, accelerated to 3.8% year-on-year from 3.5% in April.