FX.co ★ Inflation in eurozone exceeds target level due to soaring energy prices

The European Central Bank is ready to take all necessary steps to bring consumer inflation growth back to the target rate. ECB Governing Council member Olaf Sleipen said in a speech in Amsterdam that the regulator would do everything possible to stem headline inflation in the eurozone. He noted that by the upcoming June meeting, the central bank’s board would have a far more detailed and extensive set of economic data than at previous meetings. That updated information will form the basis for the decision on the future path of monetary policy.

Among ECB policymakers, there is currently an active debate over the extent of monetary tightening required. Executive Board member Isabel Schnabel has openly called for a rate hike at the next meeting, pointing to the unacceptable risks of neglecting the current macroeconomic shock in terms of its scale and persistence. At the same time, ECB chief economist Philip Lane takes a much more cautious, wait‑and‑see stance. Against this backdrop, the voting ECB members are studying in detail the mechanisms through which the sharp rally in commodity prices filters into related price indicators across European markets.

Governing Council members must carefully weigh strong inflationary pressure against an overall slowdown in economic growth and growing risks to the region’s long‑term financial stability. The main trigger of market volatility remains the ongoing war in Iran and the consequent sharp jump in oil and gas prices. The urgency of taking firm action is underscored by the latest official statistics showing that the annual CPI in the eurozone rose to 3% in April, way above the ECB’s 2% target.