Euro zone June inflation slowdown confirmed, but core rate rises

The Dollar Slides, with Carney and the Pound in Focus

Euro zone June inflation slowdown confirmed, but core rate rises

Eurozone inflation slowed to a 6-month low in June as estimated, final data from Eurostat showed Monday. In fact, the European Central Bank will not look at raising interest rates until the asset purchasing scheme has been completely faded out.

On a monthly basis, the harmonized index of consumer prices remained flat in June.

Meanwhile, core inflation, which strips out the effects of volatile energy and food costs, rose by only 1.1 per cent, below its April high of 1.2 per cent. The economy expanded for the sixteenth consecutive quarter in Q1 2017, while indicators suggest that Q2 growth could be at least as strong as the robust 0.6 percent q/q pace seen in Q1.

Speculation has mounted since the ECB's last meeting in June that the central bank might be readying markets for tighter policy at its 12:45pm announcement on Thursday.

Inflation eased slightly to 1.3% in June from 1.4% in May. The pair has been on a gradual uptrend since the beginning of the year.

The largest upward impacts to the euro area annual inflation came from accommodation services (+0.08 percentage points), package holidays (+0.06 pp) and tobacco (+0.04 pp), while telecommunication (-0.10 pp), social protection (-0.04 pp) and bread & cereals (-0.03 pp) had the biggest downward impacts.

"Striking a balance between the weak inflation outlook, above-potential growth and the credibility of instruments remains a major communication challenge for the European Central Bank, with ample room for ambiguity affecting markets", said Anatoli Annenkov, an economist at Societe Generale.

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