Inflation in the euro area is still high. However, the inflation rate has recently fallen noticeably, from 7 percent in April to 6.1 percent in May. This was announced by the European statistical office Eurostat in Luxembourg on Thursday on the basis of an initial estimate. As recently as last autumn, inflation rates were more than 10 percent.
Christian Siedenbiedel
Editor in business.
- Follow I follow
The most important change in inflation is the development of energy prices, which had risen sharply last year, additionally fueled by the beginning of the Ukraine war, and have now calmed down somewhat. In addition, a so-called statistical base effect is dampening inflation rates: this year's energy prices are now compared with those already risen from last year, which automatically lowers the rates.
When it comes to fuels, diesel in particular is now significantly cheaper than it was a year ago. When it comes to food, it varies; While some, such as butter or cooking oil, are no longer as extremely expensive as they were a year ago, bread and other cereal products are still up significantly over the year.
High inflation in Italy, low in Spain
Depending on the euro area, the inflation trend is now quite different. In Spain, for example, inflation has already fallen to 2.9 percent, not too far from the ECB's target of 2 percent. In Germany, it has fallen to 6.3 percent according to the European calculation method of the Harmonized Index of Consumer Prices (HICP), which is used for comparisons with other euro area countries. In Italy, on the other hand, it is currently still more than 8 percent.
There are several reasons for the differences in inflation rates in the individual euro area countries. For example, it is not the same everywhere how quickly changes in energy prices affect consumer prices as a whole. This is relatively strong in Spain, for example, where the inflation rate reacts particularly to changes in energy prices. The various state interventions also play a role. For example, the inflation rate in Germany was also slightly depressed in May by the introduction of the Deutschlandticket, because the prices for regional transport by bus and train were lower on average in this way.
The various state subsidies to cushion energy prices also had an impact on national inflation rates. Last but not least, there are also fundamental differences in the economic structure and economic dynamics of the euro countries, which, for example, have been causing higher inflation rates in the Baltic states all along.
ECB does not yet see a "victory" over inflation
The European Central Bank (ECB) is now faced with the challenge of continuing to respond with a uniform interest rate policy in view of the differences in the individual countries. The ECB's next interest rate decision is due on 15 June, i.e. in about two weeks. At the previous interest rate meeting in May, it became apparent that, unlike last year, there are again quite different opinions among the ECB Governing Council members about the further course.
However, according to ECB Vice-President Luis de Guindos, the latest regional data on inflation in the euro area point in the right direction. "The data we got on Tuesday and Wednesday is positive," he said at a press conference. The decline in inflation was greater than analysts had expected: "The news we are getting now is going in the direction of a major decline in headline inflation." However, it is not yet a "victory" over the price surge.
ECB President Christine Lagarde had recently reiterated that the central bank had not yet reached its goal. Inflation is "too high for too long". There is still "ground to be made up".
Almost all analysts believe that the ECB will not pause interest rate hikes just yet. Jari Stehn, the chief European economist at investment bank Goldman Sachs, expects interest rate hikes of 0.25 percentage points in June and July. This would mean that the ECB's deposit rate, which is also playing a certain role in savings interest rates at the moment, would be 3.75 percent, and the main refinancing rate would be 4.25 percent.
It is expected that savings interest rates could then also rise somewhat. Horst Biallo from the Internet portal of the same name then expects a four before the decimal point at the top of the overnight money. ECB Vice President de Guindos had also indicated on Wednesday that the ECB expects something to happen in the banks' deposit rates for its customers.