Daily Times

Sliding energy prices helped lower eurozone inflation more than expected in May but underlying pressures suggest the European Central Bank will still be inclined to raise interest rates, officials and analysts said Thursday. Headline inflation for the 20 EU countries using the euro dipped to 6.1 percent in May, according to Eurostat data. That was a drop from the 7.0 percent figure for April that had reversed five months of declines and below analysts’ consensus forecast of 6.3 percent. But inflation remains well above the 2.0 percent target set by the European Central Bank, which indicated another round of monetary tightening in two weeks’ time. “Inflation is too high and it is set to remain so for too long,” ECB chief Christine Lagarde told a banking congress in Germany. She suggested that a smaller rate increase was to come, following ECB hikes since July that have pushed up the official borrowing rate an unprecedented 3.75 percentage points. “We are approaching our cruising altitude,” Lagarde said. Core inflation, which strips out volatile energy, food, alcohol and tobacco prices, is the key signal for the ECB. In May, that figure came in at 5.3 percent, lower than the 5.6 percent recorded in April.