Eurozone return to inflation confirmed as energy slide eases

Eurozone return to inflation confirmed as energy slide eases

The eurozone returned to inflation in June after four consecutive months of falling or stable prices, new data confirmed on Friday, although the modest 0.1 percent annual rate provides the European Central Bank with only limited comfort.

Eurozone prices rose 0.1 percent year-on-year, Eurostat said, confirming its initial estimate of two weeks ago. Month-on-month, the increase was 0.2 percent.

The ECB’s Governing Council meets next Thursday to determine whether its monthly purchase of 80 billion euros ($89 billion) of assets, along with zero interest rates and free loans offered to banks, are sufficient to prevent a deflationary spiral.

The annual rate was at least positive in June, but is well short of the ECB’s target of just below 2 percent. Prices had not risen in the 19 countries using the euro since January, with deflation in three of the subsequent four months and a zero reading for March.

The ECB has promised to take any action needed to preserve financial stability after Britain voted on June 23 to leave the European Union. The Bank of England shocked markets on Thursday by not cutting interest rates as it awaits data showing the impact of the referendum vote.

Core inflation, which excludes the most volatile components of unprocessed food and energy, was unchanged at 0.8 percent in June. The narrower inflation indicator, which excludes energy, food, alcohol and tobacco products, rose to 0.9 percent from 0.8 percent in May. Both were the same as initial estimates.

Energy prices fell in June, but the decline slowed to 6.4 percent from an 8.1 drop recorded in May. Month-on-month, they were 1.7 percent higher.

Prices for services, the biggest component of the eurozone economy, rose 1.1 percent year-on-year, the strongest increase among the main components of the inflation index. They rose 1.0 percent in May.


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