Good news from the eurozone: theinflation slows down more than expected and the unemployment falls at an all-time low. According to the preliminary estimate released by Eurostat, in May the average growth in consumer prices stood at 6,1% per year, compared to the 7% recorded in April. While it also slows down to a less marked extentunderlying inflation, (that is, excluding the more volatile components), to 5,3% per year, compared to 5,6% in April. At the same time, average unemployment in the eurozone recorded a new all-time low: 6,5% in April, compared to the 6,6% it had recorded in the previous three months. The number of unemployed fell by 33 from March to 11,01 million and the youth unemployment rate decreased slightly to 13,9% in April from 14% the previous month. In Italy instead the unemployment rate in April fell to 7,8%, with a reduction of 0,1 points compared to March and 0,4 points compared to April 2022.
Eurozone, inflation sharply down in May with energy (-1,7%)
According to the EU Statistical Institute, between April and May, average prices did not increase in the euro area (zero monthly change). Among the main components, values for food, alcohol and tobacco were higher although this fell to 12,5%, compared to 13,5% in April. The slowdown in the average price increase was mainly due to the item the energy which marks a -1,7%, compared to 2,4% in April.
Looking at individual countries, inflation has come down more than expected Germany (7,6% to 6,3%), France (6,9% to 6%) and Spain (from 3,8% to 2,9%). L'Italy, despite having recorded a decrease (from 8,6% to 8,1%) is however distinguished by a persistence of the cost of living beyond expectations. Overall, inflation fell in 18 of the 20 euro countries.
The Fed seems ready to stop the hikes, the ECB not yet
After the agreement on the US debt ceiling, inflation and (consequently) the moves of central banks are once again dominating the financial markets. According to many analysts, the Fed could take a break from raising rates at its mid-June meeting (13-14). "As policy has become more restrictive, the balance between the risk of doing too much and the risk of doing too little grows," Fed Chief Jerome Powell said.
While in Brussels caution prevails. Based on past projections, “we are not yet satisfied with inflation estimates, but we will have new projections at our June 15 meeting, and these will give an updated picture incorporating the additional squeeze” of the last meeting. The president of the board herself reiterated the path that the ECB will follow, Christine Lagarde, speaking in Hannover at the "German Savings Banks Day 2023".
Lagarde (ECB): "Continuing with the increases, but more gradual"
“Today thereinflation is too high and it is destined to remain that way for too long – added Lagarde – and we are determined to bring it back to our medium-term objective of 2% in a timely manner. Think of an airplane reaching cruising altitude. In the beginning, the plane has to climb quickly and accelerate quickly. But as it gets closer to its target altitude it can reduce acceleration and maintain its current speed…We are now approaching our cruising altitude and that means we need to climb more gradually, using the speed we have already built up behind us”, concluded the president of the ECB.
It remains only to understand how much the next increase will amount to, after the pace of the tightening was slowed down in the last meeting, with +0,25%.
