Inflation in the 19-country eurozone rose to 8.1 percent in May, compared to 7.4 percent in April, beating expectations of 7.7 percent as prices continued to rise, indicating that energy was no longer the only reason for the increase in inflation, according to the latest Figures published on Tuesday by the European Statistics Office “Eurostat”.
The euro continued to decline against the dollar, and fell 0.6 percent to $ 1.0777 before recouping some of its losses. On a monthly basis, the euro rose nearly 2 percent, its best monthly performance in a year.
The continued rise in prices has piled pressure on the European Central Bank to accelerate rate hikes for the first time in more than a decade. The European Central Bank has announced plans to raise interest rates in July in an effort to ease pressure on prices, and is expected to formally end its stimulus policies related to buying bonds, next week at the earliest date. By raising the interest rate, the European Central Bank will try to catch up with other major central banks that have taken steps to confront the inflation that has spread across the world.
Rising prices are weighing on household finances and making it urgent for officials to move quickly to avoid additional cost-of-living increases. Energy prices jumped 39.2%, highlighting how war and the accompanying global energy crisis are making life more expensive for the eurozone’s 343 million residents.
“Inflation hitting the energy sector is likely to remain higher for a longer period than previously expected,” said Andrew Kenningham, chief European economist at Capital Economics, after the 27-nation bloc agreed at a summit in Brussels on Monday evening to cut Russian oil imports by 90% by the end of the year. The end of this year, in a decision that seeks to deprive Moscow of “a huge source of funding” for its war on Ukraine.
Rising prices of basic materials
According to Eurostat, the prices of food, alcohol and tobacco rose 7.5% in May, seen as “another sign of how the Russian war in Ukraine, the main global supplier of wheat and other agricultural commodities, has driven up prices around the world.” Prices of goods such as clothing, appliances, cars, computers and books increased by 4.2%. While the prices of services increased by 3.5%. According to Eurostat.
Poland case
In Poland, annual inflation in May jumped to a 24-year high of 13.9%, the government statistics office said Tuesday. Oil and natural gas prices have also risen amid fears that Russia’s war on Ukraine could disrupt supplies from Russia, the world’s largest oil exporter. Western economies, including Germany, the largest economy in the euro zone, are seeking to stop their dependence on Russian energy, which will also affect inflation.
European Union countries have agreed to ban two-thirds of the Russian oil they depend on by the end of the year. Berlin and Warsaw also pledged to stop their imports, even if they were not forced to do so, according to European sources. In total, 90% of Russian oil exports to the European Union will be affected. Concerns about negative or zero growth in Europe will be compounded by data showing that the French economy fell 0.2 percent in the first quarter compared to the previous three months, downgrading expectations.
The European Commission had significantly lowered its forecast for growth in the euro zone in 2020 to 2.7 percent, but warned that the outlook remains largely unclear due to the war in Ukraine.