Inflation across the EU is down by 0.1% from May to 1.9% in June
Eurozone inflation fell in June amid a fall in the price of oil, according to data published on Wednesday.
Inflation across the EU is down by 0.1% from May to 1.9% in June.
The figure matched the European Central Bank’s inflation target of below but close to 2%.
“Additionally, the Core CPI also slowed down to 0.9%, in marked contrast to the recent surprise prints in both the US and UK,” said Jesús Cabra Guisasola, Associate at Validus Risk Management.
Slowing Eurozone inflation is in marked contrast to the US and UK.
“Unlike the US and UK CPI data which helped initiate a move towards a more hawkish tone, these numbers will continue to support the ECB’s ultra-loose monetary policy in the coming months, as Chief Economist Lane already signalled that the September meeting would be too soon for a tapering debate.”
For individual countries, Germany‘s yearly rate of inflation came in at 2.1%, down by 0.3% from May. While Spain held the same at 2.4%, France and Italy saw a 0.1% increase, up to 1.9% and 1.3% respectively.
“So far the market reaction has been muted. However, the euro has come under some downside pressures in recent weeks, with the currency depreciating against the dollar from $1.22 to below the $1.19 level,” said Jesús Cabra Guisasola.
The Bank of England predicted last week that inflation would exceed 3%, above its target for a “temporary period”.
“The economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back,” the monetary policy committee said.
“A decline in eurozone CPI should provide some relief for markets given the impact it could have upon ECB thinking. Nonetheless, markets are on the back foot, with travel stocks once again feeling the heat in the UK,” said Joshua Mahony, Senior Market Analyst at IG.
“European stocks are on the back foot in early trade today, with another bout of sterling weakness providing little upside momentum for the FTSE 100. On a day dominated by economic data, eurozone inflation has provided a welcome sign of easing pressure on the central banks.”