Eurozone Inflation Cools

The rate of price growth in the 17 countries that share the euro dropped unexpectedly at the latest check, easing pressure on the region’s central bank to raise its benchmark interest rate, according to Financial Times.

The rate of price growth in the 17 countries that share the euro dropped unexpectedly at the latest check, easing pressure on the region’s central bank to raise its benchmark interest rate, according to Financial Times. On Tuesday, the European Union reported that annual inflation in the eurozone eased to 2.7% in May from 2.8% the previous month thanks to lessening upwards pressure on overall prices from surging energy costs. The report surprised economists like Fabio Fois of Barclays who expect to see annual inflation reach 3% or over the summer months.

The data may have eased some concerns over escalating price pressures, but the reported level of price growth still exceeds the European Central Bank’s “below but close” to 2%. Fois warned that the dip in prices could be temporary due to the late Easter holiday that boosted April prices, and ECB President Jean-Claude Trichet is expected to signal an interest rate increase will come in July. ECB executive board member Lorenzo Bini Smaghi said, “I am not sure we will have sufficient data to take a decision in June.”

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