Euro zone inflation surged past the European Central Bank’s elusive target in May, heightening a communications challenge for policymakers who will happily live with higher prices for now but may face a backlash from irate consumers.
Inflation in the 19 countries sharing the euro accelerated to 2% in May from 1.6% in April, driven by higher energy costs to its fastest rate since late 2018 and above the ECB’s aim of “below but close to 2%”, data from Eurostat showed on Tuesday.
The figure is also above expectations for 1.9% in a Reuters poll, likely intensifying talk that structural forces, not just transient factors, may be behind a surge.
“Everyone saw it coming, but still it is starting to make a lot of people sweat,” ING economist Bert Colijn said. “Inflation is returning rapidly at the moment at a time when news about economies is increasingly upbeat and labour markets are profiting from the reopening.” […]
Still, getting through this period is more a communications exercise for the ECB. The bank has already made clear that this is not the sort of inflation it is looking for after nearly a decade of undershooting its target, so policy will remain loose for years to come.
For one, the surge in inflation is temporary, even the most conservative policymakers argue.
Because everything is temporary. (h/t Chris)
David Murrell comments: Statistics Canada released its first-quarter 2021 income-and-expenditure accounts data on GDP, and the corporate media completely missed the important part of the story. The media reported that nominal GDP rose by 5.3%, but did not report that this number was composed of a 2.9% increase in the GDP price deflator, with only a 1.4% increase in real GRP (a low growth number).