Weekly Briefing - Inflation tops 4% as a big European bank deal lands

Here is the week in economics, explained without the jargon.

A major bank merger in Europe

Italy’s largest bank made an unsolicited €30.6 billion offer for a smaller rival, sending that bank’s shares up nearly 13% and lifting European bank stocks broadly. Mergers this size in the banking sector tend to draw close regulatory scrutiny, since regulators care a great deal about how much competition remains between lenders after a deal like this closes.

The trade deficit shrank sharply

One year after a major round of tariffs took effect, the US trade deficit - the gap between what the country imports and exports - had roughly halved compared with the year before. A shrinking trade deficit is one of the stated goals of tariff policy, though economists differ on how much of the credit belongs to tariffs versus other factors like a stronger dollar or softer domestic demand for imports.

Inflation accelerated again

May’s inflation data, released just after this week began, showed prices up 4.2% over the past year - the highest reading in three years - with energy prices, still driven by the ongoing Middle East conflict, responsible for well over half of the monthly increase.

What it means for you

Inflation crossing the 4% mark is a significant threshold, and it is once again being driven overwhelmingly by energy prices rather than a broad-based rise across the whole economy - a distinction that matters for how long this is likely to last.