Despite the rise in Eurozone inflation to 2.4% driven by energy base effects, core inflation’s stability at 2.7% keeps the European Central Bank (ECB) on a cautious path toward rate cuts.
The persistence of services inflation at 4.0% poses challenges for the ECB, as the dwindling effect of energy price drops shifts the focus onto services to control overall inflation.
Policymakers remain insistent that the recent uptick in inflation is temporary and will likely disregard it in their considerations, although the 0.8% month-on-month increase in services inflation raises concerns.
Current expectations for 100 basis points in rate cuts in the Eurozone may happen at a slower pace than anticipated, illustrating the ECB's careful approach amid conflicting inflation signals.
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