‘That should allow the ECB to continue to stress that underlying inflation pressure in the euro area remains weak, despite strengthening growth, when it meets next week.’ – Cathal Kennedy, RBC Capital Markets
Inflation in the Euro zone decelerated during the fifth month of the year, official figures revealed on Wednesday. Eurostat reported that its Flash Consumer Price Index for the 19-country bloc came in at 1.4% year-over-year in May, following the preceding months gain of 1.9% and missing expectations for an increase of 1.5%. Meanwhile, the so-called core inflation rate climbed 0.9% on an annual basis, compared to April’s climb of 1.2%, whereas analysts anticipated a rise of 1.0%. Most of the fall in headline inflation came on account of tumbling energy prices. According to the report, the energy price advanced 4.6% in May after surging 7.6% in the prior month. Analysts suggested that the European Central Bank would likely delay its monetary stimulus reduction amid unstable inflation growth. Earlier in the week, the ECB President Mario Draghi acknowledged improving economic growth but stated that the Bank’s stimulus should remain in place. According to economists, the Banks is unlikely to raise interest rates or withdraw some of its stimulus until inflation stabilises around the 2% target level.
