€ inflation details – The ECB may underestimate the core rate

For the first time in four years, consumer prices in the euro area excluding energy, food, alcohol and tobacco fell on a month-on-month basis.

Dr. Vincent Stamer

Commerzbank Economic Research

06/20/2025

This follows the ECB's final inflation figures for May published this week. However, the inflation details show that one-off effects have significantly distorted core inflation downwards. Without these special effects, core inflation would even be above the ECB's target when extrapolated to an annual rate. This implies that the core rate may not fall as quickly as previously envisioned.

Strong one-off effects distort the core rate downwards

According to final figures from Eurostat and the ECB, consumer prices in the euro area excluding energy, food, alcohol and tobacco (core rate) fell by 0.1% in May compared with April on a seasonally adjusted basis. This puts the core rate well below the average for the previous three months and below the ECB's target (Chart 1). However, the inflation details published this week show that special effects related to Easter have significantly distorted inflation downward: both seasonal adjustments and volatile services such as transportation services have artificially depressed the core rate. Adjusted for these special effects, the inflation rate is likely to be above the ECB's target at 0.23%.

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