Eurozone Inflation Rises by 0.2 Percent in May

The euro zone economy returned to inflation in May, the European Union’s statistics office Eurostat confirmed on Tuesday, as more expensive food, tobacco and services outweighed the impact of lower energy prices.

Eurostat said consumer prices in the 19 countries sharing the euro rose by 0.2 percent month-on-month May for a 0.3 percent year-on-year reading, confirming its earlier estimate. Prices in April had been flat.

Core inflation, which excludes the most volatile components of unprocessed food and energy, rose 0.1 percent month-on-month for a 0.9 percent year-on-year increase.

Eurostat said that in May, more expensive vegetables, restaurants and cafes and tobacco had the biggest upward impact on the overall year-on-year inflation value, while cheaper automotive fuel, heating oil and gas pulled the index down.

The European Central Bank wants to keep the headline measures of inflation at below, but close to 2 percent year-on-year over the medium term.

Worried by a trend of falling prices, the bank started buying government bonds in March to inject more cash in to the economy and make prices rise again. Some in the market believe the return of inflation could persuade the ECB to cut short its quantitative easing (QE), although most ECB policymakers have said they plan to carry out QE in full.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza