Eurozone Inflation Moderates: ECB Rate Cut Anticipated
Prices in the eurozone have seen a moderation, settling one-tenth below the medium-term price stability target set by the European Central Bank (ECB). Inflation for May dropped to 1.9%, marking a minimum since October 2024, and stirring discussions as the ECB's Governing Council prepares to convene this Thursday, where a potential interest rate cut is on the table.
According to preliminary estimates released by Eurostat this Tuesday, the annual inflation rate across the eurozone decreased to 1.9%, a three-tenths drop from April's 2.2%. This modest increase in prices is the smallest recorded in the region since September 2024, indicating a trend towards stabilization.
The data reveals that energy prices saw a year-on-year decrease of 3.6% in May, mirroring the decline noted in the previous month. Meanwhile, the cost of fresh food experienced an annual increase of 4.4%, which is slightly lower than the 4.9% recorded in April. In contrast, non-energy industrial goods remained stable with a 0.6% increase year-on-year, consistent with April's performance.
Notably, the inflation rate for services showed substantial moderation, rising by only 3.2% compared to a notable 4% in April. Excluding energy, the annual inflation rate in the eurozone in May stood at 2.5%, which is three-tenths higher than the previous month. Meanwhile, the core inflation rate—which excludes the costs of energy, fresh food, alcohol, and tobacco—fell to 2.3%, down from 2.7% in April.
Among the 20 member states, the lowest annual inflation rates were recorded in Cyprus (0.4%), France (0.6%), and Ireland (1.4%). On the other end of the spectrum, Estonia reported the highest inflation rate at 4.6%, followed closely by Croatia and Slovakia, both at 4.3%.
In Spain, the harmonized inflation rate aligned with the eurozone average, moderating to 1.9% in May. This collective data not only reflects weakening inflation pressures but also positions the ECB to consider an interest rate cut as part of its ongoing monetary policy adjustments aimed at fostering economic stability in the region.
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