"Favourable inflation gives the green light to the ECB's historic rate cut"
Ben Laidler, global markets strategist at the eToro trading and investment platform. Laidler points out that European inflation data “gives the green light to a historic first rate cut by the ECB”, although it is likely “to be accompanied by a message to 'go slow with new cuts', until we see a more favorable price trend.” definitively towards the 2% inflation objective.”
Favorable inflation gives the green light to the ECB's historic rate cut
European inflation was slightly above expectations at 2.6%, but is still close to three-year lows and this gives the green light to a historic first rate cut by the European Central Bank (ECB) the week comes. This will act as a positive catalyst for the continent's economy and stock markets.
Inflation in May rose modestly from 2.4% the previous month, with regional unemployment near record lows and services inflation outpacing moderate pressures from goods and energy prices. Prices are well anchored in the three EU heavyweights, with Germany at 2.4%, France at 2.2% and Italy at 0.8%.
This morning's update opens the door to the ECB's first interest rate cut since 2008 at its June 6 meeting, providing crucial support to Europe's stagnant and indebted economy. This is likely to come accompanied by a 'go slow on further cuts' message, until we see a more definitive price trend towards the ECB's 2% inflation target.
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