A sharp drop in eurozone inflation announced Thursday appeared to have left European Central Bank President Christine Lagarde unimpressed. She said inflation was still too high and pledged to a gathering of bankers in Hanover, Germany, to continue to raise interest rates to combat it. File Photo by Erik S. Lesse/EPA-EFE
June 1 (UPI) -- Annual eurozone inflation fell sharply in May to 6.1%, helped by falling energy prices and a slowing in the pace at which food prices rose, according to flash estimates Thursday from the European Union's main statistical agency.
The 0.9% fall in the Consumer Price Index from 7% in April came mainly from a significant 1.7% drop in the price of energy and lower food, alcohol and tobacco inflation, which fell to 12.5% compared with 13.5% in April, the latest figures from Eurostat show.
The fall in energy prices in the 20 EU countries that use the euro marked an abrupt reversal from April when the cost of energy rose by 2.4%. The headline inflation number was also pushed lower by a 0.4% fall in non-energy industrial goods inflation, down from 6.2% in April, and a fall in services inflation from 5.2% to 5%.
Every country in the zone saw inflation fall in May apart from the Netherlands, where inflation jumped 1% to 6.8%, and Malta where it remained flat at 6.4%.
However, eurozone core inflation, the key underlying inflation figure which strips out energy, food, alcohol and tobacco, also shifted in the right direction with a larger-than-expected fall to 5.3% from 5.6% in April.
Despite core consumer price inflation falling by triple the 0.1% estimate, European Central Bank President Christine Lagarde said there was "no clear evidence" inflation had topped out and that the bank would continue to hike interest rates.
"Today, inflation is too high and it is set to remain so for too long. We are determined to bring it back down to our 2% medium-term target in a timely manner, said Lagarde addressing a German Savings Bank Day event Thursday.
"That is why we have hiked rates at our fastest pace ever -- and we have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels.
"So, we need to continue our hiking cycle until we are sufficiently confident that inflation is on track to return to our target in a timely manner," Lagarde said.
The central bank has raised its main policy interest rate by 375 basis points since it began hiking in July 2022 pushing the rate from 0.5% to its current level of 3.25%. The next rate decision is due June 15 when the Governing Council of the ECB holds its monetary policy meeting in Frankfurt.