Euro zone inflation falls again in June as energy prices tumble

FRANKFURT (Reuters) – Inflation in the euro zone fell for a third straight month in June as the cost of fuel tumbled and increases in food prices slowed, a preliminary reading showed on Friday.

The data, which showed only the smallest drop in underlying inflation, was unlikely to sway the European Central Bank, which has pencilled in a ninth consecutive rate hike for July and is eyeing one in September too.

Inflation in the 20 countries that share the euro fell to 5.5% this month from 6.1% in May, a slightly bigger drop than forecast by economists, with Germany the only country to report an increase, Eurostat’s flash estimate showed.

“Core” inflation excluding energy and food, which ECB policymakers see as a better gauge of the underlying trend, only edged lower, to 6.8% from 6.9% – far from the sustained drop the central bank wants to see.

Services were the only category where price growth accelerated – to 5.4% from 5.0% – demonstrating the continued resilience of consumers to higher borrowing costs.

The ECB raised interest rates to their highest level in 22 years this month as it predicted inflation would stay above its 2% target through the end of 2025.

Most policymakers see a further hike in September as likely but they are coming under fire from governments in Italy and Portugal.

Source link