From Morningstar: 2024-05-31 07:58:00

Consumer prices in the eurozone rose by 2.6% in May, higher than economists expected and an acceleration from the previous month. Core inflation also increased to 2.9%. Services were the largest contributors to inflation, followed by food, alcohol, tobacco, non-energy industrial goods, and energy.

Eurozone inflation data has caused some concern among investors regarding ECB rate-cutting plans. However, experts believe there is no cause for panic as inflation is expected to decline further by the end of the year and differs significantly across Eurozone countries. Core inflation remains below 3%, signaling a downward trend.

Eurozone bond yields rose slightly after the inflation data release, with Germany’s 10-year yield at 0.7% and Italian BTP yield at 3.49%. The stock markets showed a mixed performance following the news.

The ECB is expected to cut interest rates at their upcoming meeting in June. While small increases in inflation may not prevent this, there is uncertainty regarding the future pace of rate cuts. ECB President Christine Lagarde stated that monetary policy will be data-dependent, with UBS economists expecting up to 75bps of cuts this year and 100bps by 2025.



Read more at Morningstar: Eurozone Inflation Accelerates; ECB Cut Is Still on…