Eurozone1 annual inflation2 is expected to be 3.6% in May 2008 according to a flash estimate issued by Eurostat, the Statistical Office of the European Union. It was 3.3% in April and 3.6% in March. The return to the March level means prices are rising at a 16-year high.
The European Central Bank's target inflation rate is "below but close to" 2%. Some economists expect recent rises in oil prices to trigger a rise in consumer prices to 4% this year, which would signal that the ECB will keep its benchmark interest rate on hold at 4% into 2009.
Computation of flash estimates
Eurozone inflation is measured by the Monetary Union Index of Consumer Prices (MUICP). To compute the MUICP flash estimates, Eurostat uses early price information relating to the reference month from Member States for which data are available3 as well as early information about energy prices.
The flash estimation procedure for the MUICP combines historical information with partial information on price developments in the most recent months to give a total index for the Eurozone. No detailed breakdown is available. Experience has shown the procedure to be reliable (15 times exactly anticipating the inflation rate and 9 times differing by 0.1 over the last two years).
1.The Member States of the Eurozone are Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia and Finland.
2. Annual inflation is the price change between the current month and the same month of the previous year.
3. The MUICP flash estimate usually includes early price information representing approximately 95% of the euro area total consumption expenditure weight.
