Key facts
- UK public long-term inflation expectations reached a record high in May.
- US Consumer Price Index increased 4.2% year-over-year in May.
- US gasoline prices rose over a dollar from the previous year.
- US wholesale inflation hit an annual rate of 6.5% in May.
- India's retail inflation rose to 3.93% year-on-year in May.
- Brazil's May inflation accelerated to 4.72%.
- Spain's annual inflation rate remained at 3.2% in May for the third consecutive month.
- Ghana's annual inflation rate accelerated to 3.7% in May.
- The Bank of Italy lowered its 2027 growth forecast to 0.4%.
Global inflation is showing an upward trend across multiple economies, largely fueled by escalating energy and fuel prices, exacerbated by geopolitical conflicts. In the United Kingdom, public long-term inflation expectations have reached a record high of 3.9% over the next five years, according to a Bank of England survey. This surge, combined with ongoing geopolitical disruptions, may prompt the Bank of England to consider further interest rate hikes. UK shares, however, saw a rise driven by hopes of a peace agreement between Iran and the U.S. that lowered oil prices.
The United States experienced a significant acceleration in inflation in May. Consumer inflation, measured by the Consumer Price Index, rose 4.2% year-over-year, marking the fastest pace in three years, with gasoline prices increasing by over a dollar. Wholesale inflation also climbed to an annual rate of 6.5% in May, directly linked to a surge in energy prices. Despite these inflationary pressures, US consumer sentiment improved in early June, buoyed by falling gas prices and a strong labor market, though persistent inflation concerns and expectations of higher borrowing costs remain.
In India, retail inflation increased to 3.93% year-on-year in May, the highest under the new 2024 base year series. Economists predict further price pressures in June due to rising fuel costs and supply disruptions, with some forecasting inflation could reach 6% by year-end. Brazil's inflation accelerated to 4.72% in May, surpassing its central bank's target range ahead of a crucial rate decision.
European economies are also grappling with inflation. Germany's economy is expected to avoid a GDP decline this year, supported by substantial government spending on defense and infrastructure, according to the Bundesbank. However, high energy costs and interest rates are projected to continue dampening growth and keeping inflation above the European Central Bank's target. Spain's annual inflation rate remained stable at 3.2% in May for the third consecutive month, with core inflation rising to 3%. The Spanish government attributes this stability to its anti-crisis measures. The Bank of Italy has lowered its 2027 growth forecast to 0.4% and revised its inflation projections upwards for the current and next year, citing weaker domestic demand due to surging energy prices and geopolitical uncertainty.
Ghana's annual inflation rate accelerated to 3.7% in May, driven by a rise in food prices to 3.3%. The central bank maintained its interest rate, anticipating inflation to stay within its target band, while the finance minister projects year-end inflation at 5%. US consumers are adjusting their spending habits, shifting towards essentials and reducing non-essential purchases due to rising fuel prices influenced by geopolitical events.