Price hikes in Germany, France, Spain fuel inflation in EU bloc

Germany, France and Spain’s price rises speeding up in was the main factor in the rise in inflation in the whole EU bloc in May, though CEE countries Romania, Croatia, Hungary have a steep hill to climb in controlling inflation.

After months of decline, in May inflation in the European Union reared its head again, in data published by Eurostat on Tuesday, tempering hopes of a rapid decline in interest rates. The prices of services are rising faster than those of goods, News.Az reports citing TVP World.

The euro area annual inflation rate was 2.6% in May 2024, up from 2.4% in April. Meanwhile in the EU as a whole inflation rose in May to 2.7% up from 2.6% a month earlier.

We can see there has been progress overall when we compare the current rates to a year ago, when the Eurozone inflation was 6.1% and the EU as a whole was buckling under an annual rate of 7.1%. However, services remain the main stickler, with prices in the sector rising 4.1% compared to last year.

Nevertheless, this month there were laggards as well as sprinters in the European race of keeping prices under control. Some of Europe’s newer members have fared worse than their rivals elsewhere. Romania’s prices are still rising unchanged from a month before at a rate of 5.8%, while Croatia's price metric has improved this month compared to last with a reading of 4.3%, down from 4.3%. However, Poland’s inflation, according to Eurostat fell from 3.0% to 2.8%.

Instead of the general trend of falling inflation, in Germany, France and Spain, we see the trend is actually going upwards. Germany’s and France’s inflation is back up 0.2 percentage points to 2.8%, and 2.6%, while Spain’s rose by 0.4 percentage points to 3.6%.

The European Central Bank cut its interest rates in its June 6 meeting by 25 basis points from 4% to 3.75%, the first cut since September 2023. Economists polled by Reuters after the cut saw another two downward moves from the ECB this year, most likely in September and December. The higher inflation reading may make it less likely for another Eurozone cut to occur, especially bearing in mind that the US held its rates. Though the central bank said they would be following data.

News.Az