On May 15, the European Commission announced a sharp increase in the eurozone inflation outlook and warned that it would pose "persistent challenges."。

EU officials raised their CPI forecast for this year to 5 percent higher due to the strength of underlying inflation.8%, the forecast for 2024 was revised up to 2.8%, compared to the previous forecast of a rise of 5.6% and up 2.5%。Separately, EU officials have also raised their growth forecasts for the eurozone over the outlook period。

The Committee also said that the key to this increase was a change in the Committee's assessment of core inflation。The European Commission is said to have raised its assessment of core inflation, which excludes volatile items such as food, by three-quarters of a percentage point, leading to a sharp rise in its inflation outlook。Officials also noted that core inflation will exceed headline inflation this year and next.。

The ECB has raised interest rates by 375 basis points since July last year.。The bank had expected inflation to not fall back to its 2 per cent target until 2025.。However, the inflation outlook given by the European Commission this time has undoubtedly poured cold water on the ECB's previous rate hikes, and the tiger-like core inflation rate may force the bank to conduct more rate hikes。

The European Commission says core inflation is poised to fall gradually as profit margins absorb wage gains and tighter financing conditions prove effective in cooling demand。However, the Committee notes that core inflation is expected to remain high as price pressures in the services sector continue to be high, overlaid with pressures on (processed) foods and commodities, which are only slowly receding.。

Despite the possibility of more rate hikes, the European Commission's growth forecast is more optimistic than before。

EU Economic Commissioner Paolo Gentiloni said: "Thanks to firm initiatives to strengthen EU energy security, a significantly resilient labour market and the easing of supply constraints, we have avoided a winter recession and are on track to achieve moderate growth.。"

In the statement, the European Commission also made a forecast for Eurozone GDP this year and next.。In particular, the Committee raised its forecast for euro area GDP growth in 2023 to 1.1%, while the GDP growth rate given for 2024 is expected to be 1.6%。

As of press time, the euro rose slightly against the dollar on the day..23%, currently trading at 1.08736。Some analysts say inflation is high in the eurozone as the Fed's rate hike cycle may be about to pause。If the ECB continues to raise interest rates, the two monetary policies may diverge。

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