Reported 12 months ago
The Euro Area's CPI inflation rate for June was released, showing a slowdown in the year-on-year Consumer Price Index (CPI) growth to 2.5%, in line with expectations, with core inflation remaining stable at 2.9%. Despite a slight cooling in Euro Area inflation, high service sector prices remain a major concern. Market expectations suggest that the European Central Bank (ECB) will maintain interest rates during the July meeting and may cut rates again in September. The euro to dollar exchange rate fell by 0.2% on the 2nd trading day and reached $1.0716, potentially ending a three-day upward trend. Eurostat announced that the Euro Area's initial estimate for June CPI growth was 2.5%, a slight slowdown from May's 2.6%, but meeting market expectations. Service sector prices showed the highest increase at 4.1% YoY, while food, alcohol, and tobacco prices decreased from 2.6% to 2.5%. Energy prices decreased from 0.3% to 0.2%. Excluding volatile energy and food prices, the core CPI for June grew by 2.9% YoY, higher than market expectations. Belgium and the Netherlands had the highest YoY CPI growth rates at 5.5% and 3.4% respectively, the highest since August 2023. Some countries with accelerated inflation rates include Italy (0.9%), Finland (0.6%), Latvia (1.4%), and Lithuania (1%). Germany's inflation slowed from 2.8% to 2.5%, and France also declined from 2.6% to 2.5% in June. Following the June inflation data, traders increased the probability of an ECB rate cut in September to 86%. Analysts predict a total cut of 44 basis points by the end of 2024, indicating the possibility of two more rate cuts, potentially in September and December. After initiating the first rate cut in 2019 during the June meeting, the ECB lowered the benchmark rate by 1 basis point. Experts suggest that the decision on further rate cuts will depend on the speed of decline in service sector inflation. Jack Allen-Reynolds, an economist at Capital Economics, stated that 'High service sector inflation this year forces ECB officials to be cautious.' ECB President Christine Lagarde stated on the 1st that the fight against inflation 'is not over' and more time is needed to ensure a cooling of inflation, hence there is no rush to implement further loose monetary policies.
Source: YAHOO