Euro-area inflation probably slowed in three out of the region’s four biggest economies last month — with the glaring exception of its biggest one, Germany.
(Bloomberg) — Euro-area inflation probably slowed in three out of the region’s four biggest economies last month — with the glaring exception of its biggest one, Germany.
Consumer prices across the region rose 5.6% in June from a year earlier — down half a percentage point from the prior month, according to a Bloomberg survey ahead of next Friday’s data.
But a so-called core measure, which strips out volatile elements such as energy, probably accelerated, while national numbers are likely show a surge in German headline inflation.
Such evidence of underlying pressures — both across the region and at its heart — may frustrate European Central Bank officials led by President Christine Lagarde after almost a year of aggressive monetary tightening to bring consumer prices under control.
Euro-zone policymakers will convene in Portugal next week for an annual Sintra retreat where they can share their dismay with global counterparts facing similar challenges — from Federal Reserve Chair Jerome Powell to Bank of England Governor Andrew Bailey.
Complicating the euro-zone picture is the divergence between its members. German inflation may have jumped by almost half a percentage point to 6.7% because of a rollout of ultra-cheap public transport last summer. Bloomberg Economics reckons that effect added 0.2 percentage point to the reading for the euro region as a whole.
More generally, Germany’s outlook seems less benign than the rest of the region. While ECB projections this month showed inflation slowing to an average of 2.2% in 2025, the Bundesbank’s forecast for its own economy is 2.7%. Its president, Joachim Nagel, is among those pushing for continued interest-rate hikes.
“There must be a number of national central banks, including at least one major one, which are much more hawkish than the ECB, and which keep pushing back on the inflation outlook,” Erik Nielsen, chief economics advisor at UniCredit Group, wrote in a June 18 report observing how the ECB’s inflation projections may have been influenced by others’ predictions.
In contrast with Germany, whose data are released on Thursday, the region’s next three biggest economies are all anticipated to show significant slowing.
First out will be Italy, where the median estimate is for the report on Wednesday to say headline price growth eased by 1.2 percentage point to 6.8%. In France, whose number is published Friday, a 0.6 percentage point moderation to 5.4% is anticipated by economists.
Most remarkable is Spain, which releases data on Thursday. Forecasters anticipate a slump in the inflation rate to 1.4% — significantly below the ECB’s 2% target.
“We are in a situation that maybe should not require more rate hikes,” Spanish Economy Minister Nadia Calvino told a local broadcaster last week as she campaigned for Prime Minister Pedro Sanchez’s Socialists before elections next month. “But I know the ECB is looking at Europe as a whole.”
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