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Inflation broke a new record in the eurozone. The largest increase in consumer prices since 1997

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According to a preliminary estimate released by Eurostat on Tuesday, the annual inflation rate in the euro area rose to 8.1% in May 2022, from 7.4% in April. This is an inflation rate four times higher than the European Central Bank’s (ECB) target, which is a 2% increase in prices.

This is the strongest year-on-year increase in consumer prices in the euro area since 1997, when statistics on the single area began to be published. Agerpres. The figure announced by Eurostat is above the estimates of analysts, who bet on a price increase of 7.7% in May.

However, the rise in inflation in the euro area is also explained in May by the fact that energy prices rose by a double-digit increase of 39.2%, while prices for food, alcohol and cigarettes rose. of 7.5%.

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Eurostat data show that core inflation, ie what remains after the elimination of prices for volatile goods, such as energy and food, has also risen from 3.9% to 4.4%, and another an indicator that, in addition to energy and food prices, also excludes cigarette and alcohol prices, rose to 3.8% from 3.5% in April. Core inflation is the indicator closely monitored by the ECB in making its monetary policy decisions.

In an attempt to keep inflation under control, both European Central Bank President Christine Lagarde and ECB chief economist Philip Lane have hinted that the Frankfurt institution will raise interest rates, most likely by 25 per cent. basic points at the monetary policy meetings in July and September.

But now there are ECB officials and economists who are wondering if these increases will be enough, especially given that core inflation is not showing signs of slowing down.

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When it comes to monetary policy interest rates, the ECB lags far behind other major central banks around the world, as many of them have started to raise interest rates since last year. The ECB’s interest rate on deposits is minus 0.5%, which means that commercial banks pay for the privilege of placing liquidity with the central bank, and the refinancing interest rate is zero.

The estimate released by Eurostat on Tuesday is a preliminary one, and a revised estimate, including inflation data in the European Union, will be released on June 17.

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