Euro Area: Inflation ebbs more than expected in June
Latest reading: Harmonized consumer prices rose 2.8% on a year-on-year basis in June, following a 3.2% rise in the prior month. The reading surprised markets to the downside.
Relative to the previous month’s figures, there were reduced price pressures for food, alcohol and tobacco (+1.6% on a year-on-year basis vs +1.9% in May), energy prices (+8.7% vs +10.9% in May) and services (+3.2% vs +3.5% in May). Finally, the variation in non-energy industrial goods prices was the same as in the prior month (+0.9% in June and May).
Meanwhile, core consumer prices rose 2.4% on a year-on-year basis in June, following a 2.6% increase in the prior month.
Finally, harmonized consumer prices fell 0.06% in June on a month-on-month basis, following a 0.09% rise in the previous month.
Panelist insight: Commenting on the outlook, Nordea’s Anders Svendsen and Tuuli Koivu stated:
“Looking ahead, we still expect second-round effects from the war in the Middle East to show up in food prices and in core goods prices. Thus, we keep a slightly upward-sloping projection for the remainder of the year, while markets have lowered implied inflation rates markedly with the drop in oil prices. Our forecast, as well as implied market expectations, points to inflation remaining above target in 2027, while the ECB staff projections show inflation returning to 2% by the middle of next year.”