Inflation in the euro area, June 2022

Harmonized inflation jumped to 8.6% in June from 8.1% in May, surpassing the European Central Bank’s target of 2.0% and the highest on record. June’s result was driven by faster increases in prices for energy, food, alcohol and tobacco, and non-energy manufactured goods. On the other hand, prices for services grew somewhat more slowly.

On a monthly basis, harmonized consumer prices rose 1.1% in June from 0.8% in May. Annual core inflation, excluding energy and raw food price volatility, rose to 4.6% in June from 4.4% in May, also the highest since records began.

Commenting on the release, Bert Colein, Senior Economist at ING, said:

“The big question for the second half of the year is when the peak of inflation will be reached. At the moment, it is very difficult to answer this question due to the volatility of changes in energy prices and uncertainty about the sustainability of second-order effects. We see more disinflationary pressures ahead as recessionary pressures build in the eurozone and global commodity prices, except for energy, rebound from their peak.”

FocusEconomics experts predict inflation will average 3.5% in 2022, unchanged from last month’s estimate, before falling to 2.7% in 2023.