CPI +2.8% vs +3.0% y/y expectedPrior +3.2%Core CPI +2.4% vs +2.5% y/y expectedPrior +2.6%
There are quite a number of positives to take away from the report here. However, the bottom line is that the numbers will not see the ECB rush into any decision going into the summer break. Inflation data is not surprising to the negative side and that will afford policymakers some added flexibility in waiting before taking their next step.
Looking at the details, energy price inflation was also seen down to 8.7% in June from 10.8% in May. But at the same time, food price inflation also dropped to 1.6% in June from 1.9% in May. And adding to that, services inflation also cooled to 3.2% in June – down from 3.5% in May.
All in all, that led to the softer headline annual inflation estimate with that dropping back under the 3% mark. In turn, core prices also dropped back lower to just 2.4% in June.
That being said though, it may be tied a little to base effects as the monthly estimates are still reflecting a more mixed picture. The monthly headline inflation estimate did drop by 0.1% on the month but it owes much to a drop in energy prices (-1.7%).
Food prices also did fall by 0.2% on a monthly basis but that is offset against a rise in services inflation on the month by 0.4%. At the balance, that sees the monthly core inflation estimate climb by 0.2% in June.
So, it is no time to be celebrating and waving the “inflation is transitory” banner just yet.
This article was written by Justin Low at investinglive.com.