Fresh CPI Data Suggests Possible Pause in Rate Cuts
European Consumer Price Index (CPI) Just Released!
Consumer prices in the Eurozone slightly increased in June, bringing inflation exactly to the European Central Bank’s (ECB) target and potentially signaling a pause in the recent cycle of interest rate cuts.
The CPI rose by 2.0% year-on-year last month, hitting the ECB’s precise inflation goal and slightly accelerating from 1.9% in May, in line with analyst expectations.
On a monthly basis, inflation grew by 0.3%, recovering from a flat reading the previous month.
When excluding volatile items such as food and energy, core inflation held steady at 2.3% for the twelve months ending in June.
ECB Governing Council member Gediminas Simkus stated earlier today via Bloomberg that inflation is now aligned with the central bank’s target, but uncertainty still looms due to persistent volatility in foreign exchange and commodity markets.
Speaking at the ECB’s annual meeting in Sintra, Portugal, Simkus warned that the current inflation path is not guaranteed to hold.
Despite the current inflation stability, the recent rise of the euro against the U.S. dollar and increasing energy prices—fueled in part by Middle East tensions—could push inflation higher in the coming months.
The euro recently reached 1.1808 against the U.S. dollar, its highest level since September 2021.
Last month, the ECB delivered its eighth interest rate cut within a year, but indicated that a pause is likely at the next meeting, especially in light of growing concerns about trade tensions with the United States.
Conclusion:
Today’s CPI release may give the ECB breathing room to pause its aggressive rate cuts. However, with rising energy costs and currency fluctuations, the road ahead remains uncertain. The markets now await the ECB’s next move.
