Street Calls of the Week
Investing.com -- Consumer prices in the eurozone rose by less than expected in May, offering the European Central Bank room to cut interest rates once more later in the week.
The eurozone consumer price index (CPI) rose by 1.9% annually last month, below the ECB’s 2.0% target midpoint, decelerating from 2.2% in April, and in line with expectations.
Month-on-month, the reading was seen flat at 0.0% after rising by 0.6% last month.
Stripping out more volatile items like food and fuel, the "core" number climbed by 2.3% in the twelve months to May, below the 2.7% seen the prior month. On a monthly basis, underlying price growth was also flat at 0.0%, after rising 1.0% in April.
Germany, the eurozone’s largest economy, published its figures late last week, and its inflation slowed to 2.1% from 2.2% in April, the federal statistics office reported on Friday, citing preliminary data harmonised to compare with other European countries.
"The economic outlook in Germany and the eurozone remains gloomy and the risks for the economy are high due to the drastic and erratic tariff policy of the U.S. president," IMK economist Silke Tober said.
"With the aim of strengthening domestic demand, the ECB should therefore ease monetary policy further in the near future," she added.
The ECB next meets on Thursday, and is widely expected to reduce interest rates by 25 basis points once more - in what would be its eighth cut in a year.
The argument for a rate cut is bolstered by these receding inflationary pressures in the eurozone, influenced by a stronger euro and lower oil prices. These factors are anticipated to lead to a downward revision of the ECB’s inflation forecasts, showing inflation falling below 2% sooner than the March predictions.
On the other hand, the eurozone’s economic resilience and the unpredictable outcome of trade negotiations could prompt some ECB members to suggest postponing further rate cuts until the July meeting.