Eurozone inflation has hit another record high on rising food and energy prices

Eurozone prices continued to rise in May, hitting record highs for the seventh month in a row.

According to preliminary data from the European Statistics Office on Tuesday, inflation stood at 8.1% a month, higher than expectations for April’s records of 7.4% and 7.8%.

This comes in the wake of rising inflation fears from several major European economies in recent days. German inflation (comparable to other EU countries) was 8.7% year-on-year in May, with preliminary data showing a sharp decline from 8% in April and 7.8% in April, beating analysts’ expectations.

French inflation rose to 5.8% in May from 5.4% in April, while consensual Spanish consumer prices rose 8.5% year-on-year in May, exceeding expectations of 8.1%.

Across the eurozone, record annual consumer price increases led to an increase in energy costs by 39.2% (from 37.5% in April) and a 7.5% increase in food, alcohol and tobacco prices (from 6.3%).

However, in the absence of energy and food prices, inflation rose to 3.8% from 3.5%, Eurostat said.

Prices have been rising in recent months as wars in Ukraine, especially over food and energy costs, have stalled exports and countries in the West have struggled to reduce their reliance on Russian gas.

EU leaders agreed late Monday to ban 90% of Russian crude oil by the end of the year. Sending higher prices. Charles Michael, chairman of the European Council, said the move would immediately affect 75% of Russia’s oil imports.

Inflation – which is consistently high not only in Europe but also in the UK, US and beyond – is causing headaches for central banks, which are also balancing the risk of recession.

Earlier this month, European Central Bank President Christine Lagarde said at a central bank meeting in July that she expects interest rates to rise.

“Based on the current outlook, it is likely to be out of negative interest rates by the end of the third quarter.” She wrote in a blog post. “If the eurozone economy heats up as a result of the positive demand shock, it would make sense for policy rates to continue to rise above the neutral rate.”

The governing body of the ECB meets on June 9 and then on July 21.

Goldman Sachs chief European economist Jari Stehn told CNBC on Tuesday that the Wall Street Bank expects the ECB’s deposit rate of 25 basis points at each of its upcoming meetings next year, currently 1.5% in June. 2023. Goldman expects euro area headline inflation to be 9% in September.

“But keep in mind that most of these are driven by energy prices, most are driven by global turmoil-related issues, and key inflation numbers, if you eliminate food and energy prices, run at about 3.5%. Wage growth is running above 2%,” Stein said in a statement on Tuesday. Said.

“So the core inflationary pressures in the euro area have definitely stabilized, which is why we think they will normalize very quickly, but they are not operating at the same levels as we see in the US and the UK. We need to take a more decisive approach to tightening. “