Eurozone preliminary annual headline inflation printed at an all-time high of 8.1% for May. This number is higher than the forecast of 7.8% and above the previous month's release of 7.5%. The major contributor was the much higher energy prices due to Russia's invasion of Ukraine. However, it's not the only concern. Food, alcohol and tobacco price increases also contributed to the blowout figure.
Core inflation, which strips out these volatile items, was also ahead of forecast, coming in at 3.8% YoY. The forecast was 3.6% (YoY), and the print for April was 3.5% (YoY). This indicates that higher production prices are being passed on to the consumer. Last week we wrote on President Lagarde's hawkish blog post. The rate hike for July is likely to remain at 25bps. However, today's substantial inflation numbers will introduce discussion around raising from 25bps to 50bps for September's hike.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.