Euro zone inflation rises to 2.6% in May, but bloc still seen heading for interest rate cut
Euro zone inflation rises to 2.6% in May, but bloc still seen heading for interest rate cut
Euro Zone Inflation Increase and Anticipated ECB Interest Rate Cut
Inflation Rate Rises in May
Euro zone inflation climbed to 2.6% in May, up from 2.4% in April, surpassing economists' expectations. This increase reflects persistent price pressures within the bloc.
Markets Expect ECB Rate Cut
Despite the inflation rise, the financial markets are fully pricing in an upcoming interest rate cut by the European Central Bank (ECB) in June, which would be the first reduction since 2019.
Services Inflation Concerns
Services inflation, crucial for ECB considerations, escalated to 4.1% from 3.7%, indicating ongoing domestic inflationary pressures that may influence future monetary policy decisions.
ECB's Monetary Policy Outlook
The ECB is poised to ease its monetary policy gradually, despite the recent inflation data, with strong market signals and previous communications pointing towards a rate cut in the near term.
What was the inflation rate in the Euro zone for May, and how did it compare to the rate in April?
The inflation rate in the Euro zone for May was 2.6%, which was higher than the 2.4% rate in April. This increase was driven by a jump in the cost of services and food3.
How did the May inflation rates for both headline and core inflation compare to economists' expectations?
In May, both headline and core inflation rates in the euro zone increased and came in higher than economists expected2. The headline inflation rose to 2.6% from 2.4% in April, while core inflation, which excludes the volatile effects of energy, food, alcohol, and tobacco, increased to 2.9% from 2.7% in April. Economists had forecasted a 0.1 percentage point increase for the headline figure and a flat reading for core inflation.