President of the European Central Bank Christine Lagarde in Davos on May 25.
Photo:
ARND WIEGMANN/REUTERS
Bad inflation datapoints are common these days, and Tuesday’s news is that eurozone consumer prices rose 8.1% in May. Is European Central Bank president
Christine Lagarde
still on the job?
May’s number is the fastest eurozone inflation since the euro was introduced in 1999. The average conceals much faster inflation in major European economies. It’s 8.7% in Germany, 10.2% in the Netherlands and 8.5% in Spain. Even relative laggards France (5.8%) and Italy (7.3%) are witnessing faster price rises than any time in recent memory.
Yes, energy and Ukraine—economists have been quick to trot out those explanations, and they’re partly true. Energy prices rose 39.2% year-on-year in May, and food prices affected by Russian disruptions to Ukrainian exports rose 7.5%. But manufactured goods are up 4.2% and services rose 3.5%. The ECB’s inflation target is 2%.
Similar inflation embarrassments have prompted other central banks to belatedly tighten policy, as both the Bank of England and the U.S. Federal Reserve are starting to do. Not so the ECB, which has yet to raise its negative policy rate and is still running its quantitative-easing program.
Officials including Ms. Lagarde have suggested the first rate increase might wait until July instead of next week’s meeting, and that might be only a quarter percentage point. That would leave…