Euro zone inflation up 0.3% in May, rises for first time in six months
Eurozone consumer prices rose for the first time in six months during May, a significant victory for the European Central Bank in its campaign to avert a slide into deflation that could have derailed the currency area’s fragile economic recovery.
Still, analysts said that the improvement in inflation—which is still far below the ECB’s target—won’t be sufficient to alter the bank’s plans to pump over €1 trillion ($1.09 trillion) into the eurozone economy in €60 billion monthly increments until at least September 2016.
The 0.3% rise in prices fa year earlier wasn’t solely due to a rebound in energy costs, and there was some evidence that strengthening consumer demand is raising the prices of other goods and services. That will encourage the ECB in its struggle to meet its inflation target of just below 2%.
Excluding prices for energy, food and alcohol that are largely beyond the ECB’s influence, inflation picked up. The core annual rate jumped to 0.9% from a record low of 0.6%. Services prices rose by 1.3% on the year, having increased by 1.0% in April.
“What this tells us is there was never really deflation in the way most people understand it, a sustained fall in prices due to weak demand,” said ABN AMRO economist Nick Kounis. “We’re more in a situation of lowflation.”
