Energy, services spur Eurozone inflation

ECB believes the surge in prices is temporary

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Robust growth in energy prices and a surge in costs of services have contributed for a sharp rise in consumer prices in the Eurozone, Reuters reported. The May data has exceeded the forecast of the European Central Bank. The statistics office of the European Union Eurostat confirmed that inflation in the 19 countries sharing the euro was up 0.3% compared to the previous month to reach a 2.0% year-on-year increase. The ECB wants to keep inflation below to 2%.

Energy prices contributed 1.19 percentage point to the overall year-on-year figure and services 0.45 point, while food, alcohol and tobacco added 0.15 points.

Without the most volatile components of energy and food, or what the ECB calls core inflation, prices rose 0.2% on the month and only 0.9% year-on-year. Economists expect inflation to rally even faster late in the year, coming closer to 2.5% as the recovery from a pandemic-induced double-dip recession and recent commodity price increases add to price pressures. But the ECB believes the surge in inflation is temporary and has vowed to keep its monetary policy loose because the drivers of price growth will fade early next year and inflation will be below target for years to come.

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