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Eurozone inflation hit a new record high of 8.1 percent in May from 7.4 percent in April, further exacerbating the cost-of-living crisis across the continent, Eurostat preliminary data showed on Tuesday.
Inflation once again exceeded the average forecast of 7.7 percent and is expected to stimulate new calls for the European Central Bank to act more aggressively to curb price pressures. Inflation is more than four times the ECB’s 2 percent target.
The increase was mainly driven by a sharp rise in energy prices (39.2 percent, compared to 37.5 percent in April), followed by food, alcohol and tobacco (7.5 percent, compared to 6.3 percent in April) – components that are further promoted. because of Russia’s war against Ukraine.
Core inflation – which excludes volatile components such as food, energy, alcohol and tobacco – strengthened significantly to 3.8 percent in May from 3.5 percent in April. Core inflation is seen as a key indicator of domestic price pressures and as a signal that external price shocks are stable.
Inflation has been driven by the aftermath of the Russian occupation of Ukraine, which has pushed up energy and commodity prices as well as problems created by the disruption of the global supply chain during the pandemic period, while lifting restrictions on Covid-19 has increased demand across Europe.
ECB policymakers will meet in Amsterdam next week and are expected to agree that rising inflation far above target requires them to start raising interest rates, which have remained at negative rates since 2014, writes Financial Times.
Some of the ECB’s most critical board members have called for it to pursue US Federal Reserve policy by raising rates at a more aggressive rate of half a percentage point in July. But others like President Christine Lagarde have urged it to move “gradually” by raising rates by a quarter of a percentage point in July and September.
Rising inflation, which hit a record high of 8.7 percent in Germany, as well as growth in France, Spain and Italy, has prompted politicians to announce measures to offset the impact on households and businesses and increased pressure on the ECB. to act.
The fastest inflation rate in the 19-member eurozone was 20.1 percent in Estonia, while the slowest was 5.6 percent in Malta.
In Albania, imported inflation reaches 57% of the total
More than half of the increase in prices in the country is due to the increase in prices of products that Albania receives from imports, signaling that the increase in consumer prices will continue further, as inflation in the Eurozone exceeded 9%. The European Union is Albania’s main trade partner. For the first 4 months of 2022, 53% of total imports came from EU countries, according to INSTAT data.
According to the Bank of Albania, for the period January-February of this year, the foreign commodity price index marked a record increase of 25.2%, further expanding from the level of 15.8% in the last quarter of last year. However, the strong position of the lek in the foreign exchange rate continues to partially dampen foreign inflationary pressures.
The Index of Foreign Inflationary Pressures expanded by 16.8% in annual terms, in the period January-February 2022, a higher percentage point compared to the last quarter of last year.
This indicator is calculated as the annual increase of the foreign price index and the Index of the Nominal Effective Exchange Rate for the respective period. The exchange rate appreciation, although stronger compared to the end of last year, has not managed to fully offset the increase in external prices.
According to the Bank of Albania, the expansion of the Foreign Inflationary Pressures Index is in line with the increase of the contribution of imported inflation to the formation of headline inflation during the first quarter of 2022. This contribution reached 57% with an increase of 11 percentage points compared to a quarter ago.
From the historical analysis conducted by the Bank of Albania, it results that the Index of Foreign Inflationary Pressures precedes the developments in the component of imported inflation by about 3-5 months. Consequently, an increase in this indicator until February will most likely be reflected in higher rates for the period between May and July.
In Albania, in April, inflation jumped to 6.2%, according to INSTAT, the highest level in 20 years./ Monitor
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