Eurozone inflation slows in June, but service costs weigh

Eurozone inflation eased in June, although the services component remained elevated, likely fueling concerns among some European Central Bank officials that domestic price pressures could remain elevated.

Consumer inflation in the 20 countries that share the euro eased to 2.5% in June on an annual basis from 2.6% a month earlier, in line with expectations in a Reuters poll of economists, as increases in the costs of energy and unprocessed food moderated.

Although the ECB has forecast that inflation will hover around this level for the rest of the year, economists are analyzing underlying price trends to assess whether the ECB can actually reduce inflation to its 2% target next year.

Core inflation repeated the previous month’s 2.9% increase, beating expectations of 2.8%, mainly due to a continued 4.1% increase in services prices.

The data is unlikely to give the ECB much clarity on the direction prices are heading, and ECB President Christine Lagarde has already said more time is needed to know for sure, so there should be no rush to ease monetary policy further.

In a possible sign that labor market stress will persist, data on Tuesday showed that euro zone unemployment remained at a record low of 6.4% in May. The jobless rate is now more than a percentage point below its pre-pandemic low, while employment is rising.

Source: Terra

Rose

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