The European Union’s statistical agency said on Tuesday that the euro zone’s overall inflation rate fell to 2.5% in June, while closely watched core and services inflation remained stable.
The overall data was in line with expectations of economists polled by Reuters. Inflation rose to 2.6% in May from 2.4% in April.
Excluding the impact of fluctuations in energy, food, alcohol and tobacco, core inflation remained at 2.9% from the previous month, slightly lower than the 2.8% forecast by economists.
The service price increase also remained unchanged at 4.1%.
Investors will now analyze what the latest data means for the trend of interest rates in the 20 euro zone countries based on data from the European Central Bank. Preliminary reduction of 25 basis points in June.
Consumer price index volatility has long been expected this year as the base effect of volatility in energy markets eases.
In June, energy inflation in the euro zone increased at an annual rate of 0.2%, a sharp change from earlier this year when the industry was under strong deflationary pull.
On Tuesday, ECB Vice President Luis de Guindos told CNBC’s Annette Weisbach that while the central bank is confident that inflation will move closer to its 2% target, future It will be a “rocky road” for a few months and there is no “predetermined path”. He made the comments on the sidelines of the European Central Bank’s Central Banking Forum in Sintra, Portugal.
According to London Stock Exchange pricing data, money markets expect that the European Central Bank is likely to cut interest rates twice more, by 25 basis points each time, at its remaining four meetings this year. They estimate there is only a 33% chance of a subsequent rate cut this month.
The euro has struggled in recent weeks under the shadow of looming political risks. French elections, which fell slightly after the data was released. At 10:30 a.m. London time, it was down 0.2% against the dollar and 0.05% against the pound.
Kyle Chapman, currency market analyst at Ballinger Group, said that aside from a slight cooling in food prices (unprocessed food inflation fell to 1.4% from 1.8%), overall, the latest consumer price index was “almost as good as May’s data.” repeat”.
“That’s enough to put a pause on this month’s ECB meeting. The stickiness of services sector inflation could start to become a real concern for policymakers, hampering rate cuts, especially given the backdrop of rising wage growth and falling unemployment, ” Chapman said in a report.
“There is no specific downward trend in services sector inflation this year, and the ECB is unlikely to cut interest rates significantly until a downward trend emerges.”
Chapman added that the rate outlook will depend on the ECB staff’s quarterly macroeconomic forecasts and whether rates move higher.
in June, ECB staff increases They raised their forecast for average annual headline inflation in 2024 to 2.5% from 2.3% and their forecast for 2025 to 2.2% from 2%.
Correction: This article has been updated to more accurately reflect the rise in inflation from April to May.
