EU raises inflation forecast in eurozone due to sharp increase in core prices – Bloomberg

The key factor in raising the inflation forecast was the three-quarter percentage point increase in the so-called core inflation estimate by the Commission, which excludes volatile items such as food prices. According to Brussels officials, this indicator will exceed the predicted price growth level both this year and next.

This is reported by Bloomberg.

It is noted that the forecasts highlight the challenge facing European Central Bank policymakers. They have raised the base borrowing cost by 375 basis points, trying to curb inflation, and may now diverge from the US Federal Reserve, as they foresee further rate increases amid fears that price growth will be prolonged.

"Core inflation is set to decline gradually as profit margins absorb higher wages and tighter financing conditions prove effective in cooling demand," writes Bloomberg. "Persistently high price pressures in services coupled with only slowly fading pressures in (processed) food and goods are expected to keep core inflation elevated."

The EU's forecast for core price growth this year is half a percentage point higher than the ECB's forecast published in March. For the next year, it is only 0.1 percentage point lower.

Background. Mind previously reported that US CPI inflation had reached 4.9% in April.