By Rhod Mackenzie
The core rate of inflation in the euro area in June increased, according to Eurostat, to 5.5% in annual terms and exceeded the expectations of specialists who had predicted 5.4%. In May, we recall, this indicator, which does not take into account the most volatile prices - for electricity and food, amounted to 5.3%. Despite a slight excess of the forecast in June and the fact that inflation in the single European currency area is now half that of October (10.6%) and the lowest over the past year and a half, Christine Lagarde, who heads the main European bank, the ECB, will most likely raise the discount rate for the next a quarter percent at the July meeting, which will be held on July 26-27. She believes that inflation remains "too long too high" to relax.
The European financial "hawks" have a reason to enter the autumn with a growing rate. However, the bankers themselves urge not to rush things. Thus, the head of the National Bank of the Netherlands (Central Bank), Klaas Noth, stressed that core inflation had reached a "plateau", while ECB vice-president Luis de Guindos optimistically said that inflation seems to have peaked.
“We believe that core inflation, which has stubbornly refused to come down, will be at the center of the ECB's discussions this summer and will force it to raise rates until September,” said eurozone economist Maeva Kuzin. “Its slight increase to 5.5% in June confirms our assumptions and testifies to the tense situation.
Lets recall that the ECB raised the discount rate 8 times after July 2022 and increased it by a total of 400 basis points.
The economic situation in the Eurozone, which consists of 20 countries of the continent, remains tense. The zone is being dragged into recession by its main economy - Germany, on which the economic indicators of not only the eurozone, but the whole of Europe depend to a large extent. The German economy, which is very vulnerable to energy prices, was unable to withstand inflation already in the last quarter of last year. It was expected that she would leave it in the second quarter of this year and add 0.1% in April-June, but it seems that the expectations were not justified. According to most economists, nothing will change in the remaining 6 months - this year the German economy will end in the red zone and will yield in many respects to the rest of the EU members.