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MNI Eurozone Inflation Insight – May 2024

EUROPEAN INFLATION
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Services Stall Underscores ECB Need For Post-June Caution

  • The Eurozone May flash inflation round saw services HICP more than reverse April’s progress, printing at 4.1% Y/Y – higher than what it was 6 months ago.
  • This meant that the wider Eurozone core HICP inflation metric surprised to the upside at 2.9% Y/Y (vs 2.7% cons), with the headline reading likewise coming in above expected at 2.6% (2.5% cons).
  • The ECB’s seasonally adjusted series also pointed to a further acceleration of services momentum in May.
  • For the ECB, the May inflation metrics are very unlikely to stand in the way of the well-signalled June rate cut. However, the ongoing stickiness in services momentum will have a bearing on rate decisions past June.
  • Recent ECB speak has again highlighted the differences in opinion amongst policymakers on this topic, and the May data will support the hawkish contingent’s calls for caution on the path ahead.
  • Our review of May's preliminary Eurozone inflation data includes breakdowns and analysis of the national inflation prints, and some sell-side reactions.

Full PDF analysis:

May2024EZCPIReview.pdf


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Services Stall Underscores ECB Need For Post-June Caution

  • The Eurozone May flash inflation round saw services HICP more than reverse April’s progress, printing at 4.1% Y/Y – higher than what it was 6 months ago.
  • This meant that the wider Eurozone core HICP inflation metric surprised to the upside at 2.9% Y/Y (vs 2.7% cons), with the headline reading likewise coming in above expected at 2.6% (2.5% cons).
  • The ECB’s seasonally adjusted series also pointed to a further acceleration of services momentum in May.
  • For the ECB, the May inflation metrics are very unlikely to stand in the way of the well-signalled June rate cut. However, the ongoing stickiness in services momentum will have a bearing on rate decisions past June.
  • Recent ECB speak has again highlighted the differences in opinion amongst policymakers on this topic, and the May data will support the hawkish contingent’s calls for caution on the path ahead.
  • Our review of May's preliminary Eurozone inflation data includes breakdowns and analysis of the national inflation prints, and some sell-side reactions.

Full PDF analysis:

May2024EZCPIReview.pdf