Inflation in Euro-Zone at Record High as ECB Mulls Pace of Rates Hike

Inflation in euro-zone accelerated to an all-time high, intensifying the debate at the European Central Bank about how rapidly to raise interest rates from record lows.

Consumer prices jumped 8.1% from a year earlier in May.

The acceleration was driven by food and energy after Russia’s invasion of Ukraine sent commodity prices soaring. A gauge that excludes volatile items like those rose 3.8%.

Following full swing rates hike, ECB is preparing to lift borrowing costs for the first time in more than a decade to combat the 19-member currency bloc’s unprecedented price spike.

Last week President Christine Lagarde indicated  that quarter-point increases are likely at meetings in July and September. Chief economist Philip Lane backed that timeline on Monday, calling moves of that size a “benchmark pace” in exiting stimulus, which also includes large-scale bond-buying.

Italy’s Ignazio Visco pushed back on Tuesday against the prospect of a more aggressive rate move, saying the ECB must proceed in an “orderly” manner to avoid potential bond-market turbulence. His French colleague, Francois Villeroy de Galhau, said the latest inflation data warrant a “gradual but resolute” normalization of monetary policy.