People walking the streets of Montmartre, Paris, France on April 23, 2024.
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According to flash figures published on Tuesday, price increases in the euro area remained stable at 2.4% in April, while the economy returned to growth in the first quarter.
Headline inflation of 2.4% was in line with the forecast of economists polled by Reuters. On a monthly basis, inflation was 0.6%.
It is the seventh consecutive month that the overall rate has been below 3%, despite a slight recovery in the rate in December due to energy prices.
Core inflation excluding energy, food, alcohol and tobacco fell to 2.7% from 2.9% in March. The impact of lower year-on-year energy prices continued to diminish, reaching -0.6% compared to -1.8% in March.
Price increases in the services sector, a key monitor for the European Central Bank, cooled to 3.7% from 4%.
Gross domestic product rose 0.3% in the first three months of the year, slightly better than economists’ consensus expectations. GDP for the fourth quarter of 2023 was revised from no growth to a contraction of 0.1%, meaning the euro zone was in a technical recession in the second half of last year.
Market expectations are rising that the ECB will begin cutting interest rates at its next monetary policy meeting on June 6th. Money market prices are currently pointing to a convergence in interest rates 70 percent chance of a June trim, according to LSEG data even higher bets on a cut in July or September.
A number of ECB voting members told CNBC earlier this month that they expect a rate cut in June, citing the need to prevent an excessive slowdown in the euro zone economy. They also pointed to risks from oil prices and volatility in the Middle East.
The fact that service sector inflation fell for the first time in six months is a “more important development that strengthens our confidence that the ECB will cut interest rates in June,” said Gerardo Martinez, European economist at BNP Paribas. in emailed comments.
However, Martinez pointed to the slightly smaller-than-expected decline in core inflation and volatility in some services sectors that led to a rise in inflation rates in France and Italy.
“With the road from here likely to be bumpy and growth data showing the Eurozone economy gaining momentum, we believe the path beyond June remains more uncertain and we continue to expect a gradual and cautious (quarterly) pace of easing by the ECB,” Martinez said.
Jane Foley, head of foreign exchange strategy at Rabobank, told CNBC by email that the growth numbers were encouraging and that stronger-than-expected core inflation “may indicate that the need for an accommodative monetary policy from the ECB is less urgent.” euros supported by the publication, she said.
“While a rate cut in June is seen by many market participants as almost a done deal, there is still plenty of room for debate about the pace of the ECB’s monetary policy moves later in the year,” Foley added.
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2024-04-30 10:28:18
www.cnbc.com
