MNI BRIEF: EZ Inflation At 8.1%, Underlines ECB's Challenge

Inflation in the eurozone was confirmed at 8.1% in May, with a variation in levels across the region, according to Eurostat. Prices rose just 5.8% y/y in France and Malta, but rose 20.1% in Estonia and 18.5% in Lithuania.

Core inflation rose 3.8% y/y, accelerating from 3.5% in April.

The data underlines the dilemma facing the European Central Bank -- the need to address rising prices but remain mindful of the different impacts across the region. With an intended hike of 25 bps in July, followed by a potential 50 bps hike in September, policymakers have at least signalled intent to embark on a tightening cycle. Further work towards a tool to fight fragmentation issues across EZ bond markets, as this week's ad hoc meeting of the Governing Council suggested, will give the ECB even greater flexibility in its fight against inflation (MNI INTERVIEW: ECB Should Hike By Up To 100Bps).