Euro area June inflation should remain at 0.5% until year-end

The high-level breakdown provided by Eurostat came largely in line with our expectations, with an unchanged headline print the result of an uptick in core inflation offset by another drop in food, alcohol and tobacco (FAT) annual prices.

June core inflation edged up in line with our above-consensus forecast to 0.8% y/y from 0.7% y/y in May, mainly as a result of services (+0.2pp to 1.3% y/y). Meanwhile, FAT prices declined further by 0.3pp to -0.2% y/y. As we expected, NEIG and energy prices remained broadly unchanged (Figures 1 and 2).

All in all, today’s release came largely in line with our expectations. We continue to believe that euro area inflation will remain at these levels until the end of the year. Our baseline even envisages a drop to 0.4% y/y over the summer.

We project euro area inflation to average 0.5% this year before edging up very gradually next year to an average 0.8%. Nonetheless, we remain vigilant about the possibility of higher oil prices related to geopolitical tensions, which could push headline prices higher.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

Be the first to comment on "Euro area June inflation should remain at 0.5% until year-end"

Leave a comment