Euro Area annual inflation declined to 2.7% rate – May 2011

The Eurostat published today that the Euro Area inflation rate reached 2.7% (Y-2-Y) during May 2011.

This is a moderate decrease from April’s inflation rate of 2.8%.

The EU inflation rate during April reached 3.2%, a decrease from 3.3% during April.

Among the Euro Area countries with the highest inflation rates were Estonia (5.5%), Slovakia (4.2%), and Cyprus (4.1%).

The lowest inflation rates were recorded in Ireland (1.2%), France (2.2%) and Netherlands (2.4%).

Among the major components that contributed to the rising CPI were Fuels for transport (12.8%) and Heating oil (19%) which inclined due to the high crude oil prices.

This moderate drop in the Euro Area inflation might be among the reasons for the decline in the Euro currencies compared with major currencies including the US dollar.

As seen in the chart below, this drop in the inflation might be due, in part, to the raise in the Euro basic interest rate a couple of months back; however if the ECB will decide to further raise the interest rate in the months to come this may curb the inflation pressures and strengthen the Euro.

CPI EURO AREA 2010-2011 (Y-2-Y) & Basic Interest Rate of ECB JUNE 16

Euros to USD is currently traded down at 1.4148 a 0.2275% decrease as of 14:54*.

(* GMT)


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