A inflation already area do euro slowed last month much more than expected, further reducing pressure on the European Central Bank to increase rates again. interest rates this month in order to offset the rapid increase in prices.
General inflation in the 21 countries that use the euro fell to 2,8% in June, compared to 3.2% in May, well below the expectation of 3.0%, as the rise in food, energy and services prices decelerated.
The underlying inflation indicator, which excludes volatile food and fuel prices, fell from 2.6% to 2,4%as services inflation fell from 3.5% to 3,2%.
Although the June data is still well above the 2% goal According to the ECB, the recent drop in oil prices, driven by bets on a Middle East peace deal, has raised expectations that price pressures will ease from now on and that the broader damage from the energy boom will remain limited.
Several authorities stated that there is no “rush” for the BCE continue to increase 0.25 percentage points of the June interest rate with another movement this month, and that they can wait a little to see how the pressures evolve.
The ECB is particularly concerned about the possibility that the shock energetic initial start to raise the prices of other goods and services, ending up also raising salaries.
But these second-round effects on prices have not yet materialized and pressures salary They are also not accelerating, which reinforces the argument for patience.
Still, the vast majority of economists and investors 🏽 believe the ECB is likely to raise interest rates again in September or October, even if there is a .
This is because energy prices still remain well above pre-war levels and the conflict in the Middle East it could take yet another unexpected twist, as it has done many times before.
There are also concerns that fertilizer shortages in the Middle East and a heatwave in Europe could and exert some upward pressure on food prices, raising inflation just when energy costs are falling.
The ECB’s next decision on the issue is scheduled for July 23.
