Eurozone Inflation Exceeds Central Bank Target in May

Eurozone inflation rose above the European Central Bank’s target in May, highlighting a challenge for policymakers who may accept higher prices for now but may face a backlash from angry consumers.

Inflation in the 19 countries that deal in the euro accelerated to 2% in May from 1.6% in April, driven by rising energy costs toward its fastest rate since late 2018 and above the European Central Bank’s target for inflation “just a little less than 2%”.

But this is unlikely to be peak inflation, which could approach 2.5% late in the year as the recovery from the pandemic double-dip recession and recent increases in commodity prices are adding to price pressures.

Core inflation, which does not include volatile food and energy costs, rose to 0.9% from 0.8%. A narrower measure, which excludes alcohol and tobacco prices, rose to 0.9% from 0.7%.