‘There is simply not enough (or any) evidence that inflation is picking up and so a change to the inflation risk assessment by the ECB cannot be justified.’ – Richard McGuire, Rabobank.
Consumer inflation in the Euro zone rose in line with analysts’ forecasts last month, official figures revealed on Monday. Eurostat reported that its Final Consumer Price Index came in at 1.3% in June, matching the flash estimate and falling down from 1.4% registered in preceding month. Meanwhile, the so-called core inflation rate rose 1.1% on an annual basis, following May’s 0.9% increase. Moreover, the services sector inflation increased 1.6%, compared to 1.1% seen in the same month a year ago. Back in June, the ECB President Mario Draghi announced that consumer prices’ growth was affected by temporary factors, such as after-effects of energy and commodity price shocks. However, after strong Euro zone’s economic recovery at the beginning of the year, any further weakness in inflation is likely to diminish expectations for the ECB to remove accommodation. Despite recent figures being almost sufficient to encourage policy tightening, the European Central Bank is expected to be cautious over monetary stimulus withdrawal. Economists anticipate no changes in key interest rates until inflation reaches the 2% target.
