|
Consumer inflation in the 20 nations sharing the euro currency
slowed to 2.5% in June from 2.6% a month earlier, in line with
expectations in a Reuters poll of economists, as a rise in
energy and unprocessed food costs moderated.
While the ECB has long predicted that inflation will hover on
either side of this level for the rest of the year, economists
are scrutinizing underlying price trends to gauge whether the
ECB can indeed bring inflation down to its 2% target next year.
This closely watched core inflation figure held steady at 2.9%,
coming above expectations for 2.8%, mostly on a continued 4.1%
rise in services prices.
The figures are unlikely to provide the ECB much clarity on
where prices are heading and ECB President Christine Lagarde
already said that more time is needed to be certain, so there
should be no hurry to ease policy further.
While the price of goods has been muted for much of this year
and energy inflation has also dropped, services have proven
sticky, a phenomenon that has divided ECB policymakers.
Some argue that services developments merely follow other
components with a delay and a moderation is in the pipeline,
also to be helped by an economic rebound that should improve
competitiveness.
Others, however, fear that labor shortages, rapid wage growth
and poor productivity indicators in services could entrench
rapid price growth and this could keep overall inflation above
target for an extended period.
In a possible sign that labor market stress will persist, data
on Tuesday showed euro zone unemployment holding steady at a
record low 6.4% in May. The jobless rate is now more than a full
percentage point lower than its pre-pandemic low while
employment is rising.
The ECB lowered interest rates in early June to acknowledge
earlier leaps in disinflation but made no commitment about
subsequent moves, arguing it still lacked confidence that
inflation was on track to target.
Policymakers nevertheless appear to agree that the next move is
a cut and the only question is the timing. July is too early for
such a move, many argue, but September is an open debate,
especially if wage and prices trend data confirm ECB projection.
(Reporting by Balazs Koranyi; Editing by Bernadette Baum)
[© 2024 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
