Central Banks

On Monday Germany’s inflation figures came in at their highest since the country was reunified after fall of the Berlin Wall:

Monetary policymakers at the European Central Bank are sweating, They are way, way behind the curve. Like the Fed was, and still is.

Today we get EZ inflation data:

Euro zone inflation hit a record 7.5% in April. Stripping out energy and food costs still leaves the rate well above the ECB target.

The ECB’s deposit rate is currently -0.5%,

The May figures will rock the ECB further.

A couple of snippet previews. TD:

Euro area headline HICP inflation will likely reach a new series high in May at 7.8%

  • rebound in fuel prices and continued acceleration in food inflation likely being the main drivers
  • we look for EZ core inflation to soften 0.1ppts to 3.4% y/y due to weakness in the non-energy industrial goods component


likely to have jumped from 7.4% to 8.0% in May

  • The decline in energy prices in April did not continue. More had to be paid again for all types of energy in May.
  • y/y rate of change is likely to have risen from 37.5% to 39%. This alone increases the inflation rate in May by 0.15 percentage points.

The inflation rate excluding energy, food, alcohol and tobacco is likely to have risen further from 3.5% in April to 3.8% in May

  • The jump in food prices is even greater. Here, the y/y rate is likely to have climbed from 6.3% to 7.3%, which in itself pushes up the inflation rate by 0.2 percentage points.

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