Brussels, May 31, 2024, The Europe Today: Consumer prices in the eurozone increased by 2.6% year-on-year in May, up from 2.4% in April, according to the latest data from Eurostat, the European Union’s statistics agency. This figure surpasses the European Central Bank’s (ECB) target of 2%.
Despite the higher-than-expected rise, the ECB is anticipated to cut interest rates next week. The central bank had aggressively increased rates starting in July 2022 in response to soaring inflation driven by Russia’s reduction of gas supplies to Europe amid geopolitical tensions and the lingering effects of the COVID-19 pandemic, which disrupted supply chains.
With inflation gradually decreasing from its peak, the ECB aims to stimulate economic growth with rate cuts. However, analysts caution that these cuts will likely be incremental, especially given the latest inflation data.
Eurostat Findings
Core inflation, which excludes volatile items such as energy, food, alcohol, and tobacco, rose to 2.9% in May from 2.7% in April. The service sector experienced the most significant price increase, at 4.1% in May compared to 3.7% in April. Conversely, the prices of food, alcohol, and tobacco decreased from 2.8% in April to 2.6% in May. Energy prices also rose by 0.3% in May, following a 0.6% decline in April.
Country-Specific Data
Latvia reported the lowest inflation rate in May at 0.2%, followed by Finland at 0.5%. Belgium had the highest inflation rate, reaching 4.9%. In Germany, consumer prices increased by 2.4% in May compared to the same month last year, according to preliminary figures from Germany’s Federal Statistical Office, Destatis.
The ECB’s forthcoming decision on interest rates will be closely watched as it seeks to balance inflation control with economic growth amidst these varied economic pressures across the eurozone.
