KOF Monetary Policy Communicator, May 2023

The Governing Council decided to raise the three key ECB interest rates by 25 basis points. The Council also expects to discontinue the reinvestments under the Asset Purchase Programme (APP) as of July 2023.

According to Eurostat's flash estimate, annual HICP inflation in the euro area was 7.0% in April, up from 6.9% in March. Underlying inflation remains high. While industrial goods inflation has declined, services inflation has increased. However, price pressures are exacerbated by high energy costs, which are spill-ing over into the overall economy. Pent-up demand and robust labour markets continue to drive up wag-es and inflation. In some sectors, the supply-demand imbalance and uncertainty about inflation have allowed companies to increase their profit margins. Some measures of longer-term inflation expectations have risen slightly and should continue to be monitored.