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Inflation in the Eurozone Reaches New Highs, Putting Pressure on the ECB to Raise Interest Rates

Inflation in the eurozone again reached a record high in May. This affects the European Central Bank’s (ECB) view that a gradual increase in interest rates will be sufficient to contain high inflation.

Inflation in the eurozone, which comprises 19 countries, rose to 8.1% in May from 7.4% in April as commodity prices continued to surge. But it’s no longer just about energy prices.

Product prices have skyrocketed across Europe in the past year. This is a result of supply chain problems following the COVID-19 epidemic and the sanctions imposed on Russia.

Core inflation, excluding food and energy prices, rose 4.4% year-on-year in May from 3.9% in April.

ECB Chairman Christine Lagarde and chief economist Philip Lane said the ECB could raise its deposit rate by 0.25% from -0.5% in July and September this year.

The ECB will hold a monetary policy meeting on June 9, where it will officially end its bond-buying program at the end of June. and will signal a rate hike as well.

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