Consumer price index rose in May by 0.6% inline with median forecasts and up from 0.3% in April, while compared with a year earlier prices rose 3.7% slightly higher than the previous and expected 3.6% rise, while Core CPI rose in May by 1.7% higher than the previous 1.6% rise yet below the 1.8% expected rise.
The data comes to support the latest comments from the ECB chairman, as he said the ECB are looking at rising inflation with heightened alertness stressing that the ECB might be forced into hiking rates in order to help tame inflationary pressures in the Euro area.
Rising food and energy prices contributed the most in this rise, crude oil hit a record high at $139 per barrel and continues to settle within the $130 levels, this along with rising wages are putting huge pressures on inflation rates and indeed forced some members into thinking about hiking rates at the last ECB meeting where they decided to maintain rates steady at 4.00 percent.
Rising inflation is becoming more of a global problem now as central banks around the planet seems to be adapting a tight monetary policy even as their outlook remained subject to downside risks to growth, yet the ECB are not concerned about growth right now especially since their economic fundamentals are still sound, and the fact that the Euro continues to be elevated couldn't hamper their export growth!
Indeed Germany reported better than expected growth during the first three months of this year and the Euro area didn't show any signs of severe weakness, while strong money supply growth only added to inflation, meanwhile employment continued to be strong which means the economy is doing just fine for now.
Now the next step seems rather clear now, a rate hike followed by steady rates until further development evolve that can either lead the ECB into hiking or maintain their rates steady to counter upside risks to inflation or indeed cut rates as markets expect the Euro Zone economy to start show sluggish growth!