US Followed by Eurozone Inflation Emergency

Consumer Prices in May Rise 2% Year-on-Year... Exceeding ECB Monetary Policy Target

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] The Eurozone's consumer price inflation rate for May has reached 2%, surpassing the European Central Bank (ECB)'s monetary policy target, raising expectations of increased controversy surrounding the ECB's quantitative easing policy going forward.

Eurostat, the EU's statistical office, announced on the 1st (local time) that the Eurozone consumer price index rose by 2% year-on-year in May. This exceeded Bloomberg's forecast of 1.9% and surpassed the ECB's monetary policy target of maintaining inflation close to 2%. This is the first time since October 2018 that the Eurozone's consumer price inflation rate has reached 2%.

The Eurozone consumer price inflation rate was only 0.9% in January this year but has more than doubled in four months. It recorded 1.3% in February and March, 1.6% in April, and then rose by 0.4 percentage points in May, indicating a steep upward trend.

With the U.S. consumer price inflation rate soaring to 4.2% in April, intensifying debates over the Federal Reserve's (Fed) monetary policy, controversy is also expected to grow over whether the ECB should reduce its asset purchase scale. Germany's central bank, the Bundesbank, previously expressed concerns about inflation, stating that Germany's consumer price inflation rate could reach 4% by the end of this year, the highest since the introduction of the euro in 1999.

However, ECB President Christine Lagarde recently stated that the current price increases are temporary and are expected to decline again next year. President Lagarde argues that the ECB should maintain a monetary policy focused on economic stimulus.

In fact, the May increase in Eurozone consumer prices was largely influenced by volatility in energy prices. Energy prices rose by 13.1% in May, leading the consumer price inflation. Excluding energy and food items, the May consumer price inflation rate was only 0.9%.

There are also claims that the high number of unemployed people in the Eurozone should be taken into account. As of April, the number of unemployed in the Eurozone was 15.4 million, down by 134,000 from March. However, this is still 1.3 million higher than in April last year, just after the declaration of the COVID-19 pandemic.

The ECB will hold a monetary policy meeting on the 10th.

This content was produced with the assistance of AI translation services.