Inflation in the Eurozone fell to 6.1% as individual countries also posted declines. However, Lagarde plans to raise prices further.
Eurozone inflation fell in May, with a sharper decline than analysts and observers expected. flash numbers It shows that headline inflation, which was 7% in April, fell to 6.1% in May. This is the lowest number on record since February 2022. According to a Reuters poll, the economy set May’s number at 6.3%. The core inflation rate, minus food and energy, also fell from 5.6% to 5.3%.
Public sentiment in certain European countries was also positive. Overall, the Euro rose slightly against the British Pound and the US Dollar, as European stocks also saw their values rise. Specifically, the news from Italy and Spain shows that inflation in both countries is gradually declining. France and Germany are also witnessing cuts below expected expectations.
Lagarde: Inflation in the eurozone is still very high
Although inflation has fallen below expected levels, Christine Lagarde, President of the European Central Bank, believes that it is still too high. Speaking at the Deutscher Sparkassentag 2023 conference, Lagarde said:
Today, inflation is very high and is set to stay that way for a very long time. We are determined to bring it back to our medium term target of 2% in due course.”
Lagarde further explained that fighting inflation is the reason why the European Central Bank is “raising interest rates at the fastest pace ever”. I also clearly stated that there will be more hikes until the main bank achieves its target. However, the letter also indicates that the ECB monitors the impact of all policies on the economy. She said:
“Therefore, we need to continue our hiking cycle until we are confident enough that inflation is on track to return to our target in time. At the same time, we need to carefully assess the strength of the transmission of monetary policy to finance, economic and inflation conditions.” .
In a recent note, the chief economist for the eurozone at Dutch bank ING Bert Kollen said that several drivers of inflation have improved over the past few months. According to him, as these factors are reflected in the data, inflation should start to decline over the next few months. Regardless, Deutsche Bundesbank Chairman Joachim Nagel-Lagarde backed it, saying he expected further interest rate increases.
Inflation in member countries
Inflation in Spain fell to a two-year low of 2.9% after the government subsidized gas bills. Germany’s inflation rate decreased from 7.6% to 6.3%, while France also recorded a decrease, from 6.9% to 6%. However, France also saw an 11% drop in food purchases. The second largest economy in the region recorded fewer purchases than was seen during the COVID pandemic.
According to Charlotte de Montpellier, chief economist at ING Bank, the figure shows that inflation has hit the economy hard. This situation led to a decrease in purchasing power and forced people to rethink purchases and public consumption.
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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify cryptocurrency stories down to the bare essentials so that anyone anywhere can understand without much background knowledge. When not deep into cryptocurrency stories, Tolo enjoys music, loves to sing, and is a movie lover.
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