Natasha May, global market analyst at J.P. Morgan Asset Management comments on today’s Eurozone inflation print:
“The time for gradualism is over: today’s eurozone inflation release paves the way for another ECB rate cut this month. While a decline in headline inflation was widely expected, the fall was accompanied by early signs of easing price pressures in services. Alongside recently weaker activity data – which implies weaker longer-term inflation – this makes the case for speedier policy normalisation.
“More broadly, the eurozone rebound anticipated in early 2024 has turned out to be quite tepid. Consumers were expected to gain confidence from real income gains, driving a pick-up in spending. But confidence remains somewhat depressed and the manufacturing sector still looks very weak, raising the risk of inflation undershooting the ECB’s 2% target in the medium term. Today’s release should give the ECB more confidence that shorter-term price pressures are normalising, and therefore that interest rates should be normalised faster too.”
