Euro-area underlying inflation, the key measure of price gains for the European Central Bank, accelerated more than initially reported in June, cementing the interest-rate increase widely expected next week.
(Bloomberg) — Euro-area underlying inflation, the key measure of price gains for the European Central Bank, accelerated more than initially reported in June, cementing the interest-rate increase widely expected next week.
Core consumer prices, stripping out volatile elements like food and energy, rose 5.5% from a year earlier, Eurostat said Wednesday. That compares with a preliminary estimate of 5.4% and a reading of 5.3% in May.
The main gauge of inflation was confirmed at 5.5% — the lowest level since before Russia invaded Ukraine. Economists surveyed by Bloomberg see underlying price growth exceeding the overall figure through end-2024.
With headline inflation now having almost halved since its 10.6% peak in October, officials have shifted focus to the narrower measure, which is proving more stubborn. While Wednesday’s upward revision could provide ammunition for ECB hawks keen for rate hikes to continue into the fall, some have recently struck a softer tone.
Speaking Tuesday, Dutch central bank chief Klaas Knot said core inflation appears to have “plateaued,” describing any action beyond July as “a possibility but by no means a certainty.” ECB Vice President Luis de Guindos had earlier showed some optimism that underlying inflation may be peaking.
What Bloomberg Economics Says…
“We expect sticky core inflation through summer will dominate the debate and push the ECB to deliver a last hike in September, to a terminal rate of 4%. The small upward revision to the core reading to 5.5% illustrates this tension.”
—Maeva Cousin, euro-area economist. Click here for full REACT
Communication will be key for the ECB after the July 26-27 meeting, with people familiar with the Governing Council’s thinking telling Bloomberg that striking the correct tone in telegraphing their future intentions will be the biggest challenge.
–With assistance from Mark Evans and Joel Rinneby.
(Updates with comment from Bloomberg Economics after fifth paragraph.)
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