Eurozone inflation rate up to 2% in May

The Eurozone inflation rate continued to rise in May as the Harmonised Index of Consumer Prices (HICP) reads at two percent year on year, according to preliminary estimates from Eurostat on Tuesday, reported Xinhua.

The inflation surge was driven by the HICP's energy component, with an inflation of 13.1 percent compared to 10.4 percent in April, said the European Union's statistical office. The cost of services also increased, with a reading at 1.1 percent compared to 0.9 percent in April.

The two percent inflation estimate reaches the upper limit set by the European Central Bank in its task to maintain price stability across the Eurozone.

Inflation in the Eurozone was at -0.3 percent in December 2020. It remained at 0.9 percent throughout January and February, and continued rising to reach 1.6 percent in April. This has been the fastest acceleration in the history of Eurostat's recordings of the Eurozone inflation, according to IHS Markit's Vice President Ken Wattret.

The development can be explained by several factors: the rebound of crude oil prices, the end of Germany's temporary VAT reductions, the yearly adjustment of the HICP weights, and sales periods being moved or reduced due to the COVID-19 pandemic, according to Wattret.

Despite the fact, the European Central Bank has decided to reconfirm its very accommodative monetary policy stance.

"The ECB's approach reflects an eagerness to avoid a repeat of its prior policy missteps, notably the premature unwinding of monetary accommodation back in 2011 which contributed to the subsequent escalation of the eurozone crisis," said Wattret.