Brussels / Berlin (Reuters) – A few weeks after opening the monetary floodgates by the ECB pull prices in the euro zone again.
Inflation in May was 0.3 percent, as the European statistics agency Eurostat announced on Tuesday. Thus, the increase is a tad higher than expected by experts. In April prices had stagnated after they had previously fallen four consecutive months.
This was the European Central Bank (ECB) called into action which will fuel inflation with a massive program of buying government bonds since March. This is to prevent that there is a deflationary price slide across the board, which can paralyze an economy. On the forthcoming Wednesday Governing Council meeting in Frankfurt, the most recent data are therefore likely to provide more relaxed faces at the monetary authorities.
“The risk of deflation seems averted,” said the economist Heiko Peters by Deutsche Bank. While there could always be fluctuations in the oil price. But it also speak for the last strong wage increases in Germany is currently nothing to suggest that the prices came again to slip. The ECB aims to beat inflation by just under two percent. With estimated at about one trillion euros purchase program the monetary authorities want to ensure that banks make fewer investments in government bonds and instead lend more. This should ultimately increase the price level. The latest inflation data mean for the ECB indeed a stage victory, but it is nowhere near the target.
The main reason for the current low cost of living, the price of oil. So cost energy in May an average of five per cent less than a year ago. Excluding energy, inflation was considerably higher – at 1.0 percent. Services prices were up year on year by 1.3 percent. The price of food rose, namely by 1.2 percent. “This is likely to gradually the impact of the strong depreciation of the euro since last fall show,” said Postbank expert Heinrich Bayer. Food imports from overseas such as coffee became more expensive as the euro lost against the dollar in value.
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