Eurozone inflation surges to 8.1 per cent as pressure grows on ECB for rate hikes
Eurozone inflation surged ahead of expectations to a record high in May as pressure grows on the European Central Bank’s to hike interest rates.
Inflation in the 19 countries sharing the euro accelerated to 8.1 per cent in May from 7.4 per cent in April, beating economist’s expectations of 7.7 per cent.
Price growth continued to broaden, as inflation excluding food and energy prices accelerated to 4.4 per cent from 3.9 per cent, indicating that it is no longer just soaring energy costs pulling up the headline figure.
Analysts said the inflation print today increased pressure on the ECB to hike rates faster.
“The inflation problem in the euro area is getting worse,” said Commerzbank economist Christoph Weil. “Today’s price data once again increase the pressure on the ECB to end its ultra-loose monetary policy.”
European shares plunged on the inflationary reading today, with STOXX indexx of eurozone shares plunging 0.9 per cent while the pan-European Stoxx 600 index, falling 0.6 per cent.
Investors will now be watching closely to to see how the ECB reacts to the news, after the bank’s chief economist Philip Lane indicated this week that interest rates will go up by 0.25 per cent in July and September.
“Normalisation has a natural focus on moving in units of 25 basis points, so increases of 25 basis points in the July and September meetings are a benchmark pace,” he told the Spanish newspaper Cinco Dias.
The ECB will next meet on June 9, when it will formally end a bond purchase scheme from the end of June and continue to signal rate hikes.