TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Euro zone inflation rises just as ECB prepares to cut rates
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Consumers shop at the milk section of a supermarket in Issy-les-Moulineaux, near Paris, on May 16, 2024. (AFP/Joel Saget)
E
uro zone inflation rose in May, data showed on Friday, in a sign the European Central Bank still faces a slow and uncertain journey to rein in prices.
The bigger-than-expected increase in inflation was unlikely to stop the ECB from lowering borrowing costs from a record high next week, but may cement the case for a pause in July and a slower pace of interest rate reductions in the coming months.
Consumer prices in the 20 countries that share the euro rose by 2.6 percent year on year in May, inching away from the ECB's 2 percent goal after increases of 2.4 percent in the previous two months, according to Eurostat's flash estimate.
Economists polled by Reuters had anticipated a 2.5 percent increase although an upside surprise was likely after German, French and Spanish readings earlier.
More significantly, a closely watched measure of underlying inflation that excludes food, energy, alcohol and tobacco came in at 2.9 percent from 2.7 percent in April.
Prices in the services sector, which some policymakers have singled out as especially relevant because they reflect domestic demand, rebounded to 4.1 percent from 3.7 percent.
This was likely to mirror larger-than-expected increases in wages in the first quarter of the year, which have boosted consumers' battered disposable income after years of below-inflation pay hikes.
The ECB's biggest ever streak of rate hikes has helped bring down inflation from a whopping 10 percent in late 2022 and stabilized consumer expectations but it has also choked off credit.
This meant that policymakers meeting next week were likely to stick to well-telegraphed plans to cut rates despite growing market doubts about a global narrative of falling inflation.
