The unexpected increase in Eurozone inflation has cast doubt on the European Central Bank’s (ECB) plans to lower interest rates next week. While economists still predict that the ECB will cut its deposit rate by 0.25 percentage points, recent inflation data has raised concerns about future cuts. Inflation in the euro area exceeded expectations in May, and core inflation, which excludes food and energy prices, also accelerated more than expected. Service inflation rose sharply to 4.1 percent, adding to worries about interest rate cuts. Despite this, analysts still anticipate at least two interest rate cuts after June. Some financial institutions have adjusted their forecasts for interest rate cuts, while others continue to expect three cuts this year. Overall, the inflation data for May has prompted a reevaluation of predictions for interest rate cuts and the economic outlook for the Eurozone.
Unprecedented Eurozone Inflation Tugs at ECB’s Plans for Interest Rate Cuts: What this Means for the Future of the Eurozone Economy
