Natasha May, Global Market Analyst at J.P. Morgan Asset Management (JPMAM) comments on today’s Eurozone inflation data and how it might impact the next ECB interest rate decision.
“The eurozone economy is on the up. Today’s flurry of economic data suggests that growth is finally improving, just as the most resistant part of the inflation basket – services – shows signs of easing.
After a year and a half of effective stagnation, GDP growth in the first quarter surprised positively, with a meaningful gain of 0.3% quarter on quarter. With higher-frequency indicators such as the PMIs also picking up, this print is a definite cause for optimism. And while headline inflation held steady in April – thanks to energy prices looking less flattering versus year-ago levels – services prices finally decelerated after five months of no change.
Given services inflation is a key watch item for the ECB, today’s release leaves the central bank on track to cut rates come June, despite the improving growth outlook. This should further support eurozone activity in the second half of the year – and could therefore spread some spring cheer in European equity markets.”
