The recent surge in Eurozone inflation has caused uncertainty about the European Central Bank’s (ECB) upcoming interest rate cuts. Despite this, economists still expect the ECB to lower its key interest rate next week. However, the outlook for autumn interest rate cuts is now more uncertain due to the faster rise in inflation.
Inflation in May exceeded expectations, and service inflation rose sharply. While core inflation, which excludes food and energy prices, also accelerated more than expected, reaching 2.9 percent, it was not enough to dampen analysts’ predictions for at least two interest rate cuts after June. Danske Bank has adjusted its forecasts for two cuts after June, while OP and Nordea still expect three cuts this year.
The latest inflation figures have prompted analysts to reassess their predictions for interest rate cuts and the economic outlook for the Eurozone. Despite the uncertainty surrounding future interest rate cuts, analysts agree that the longer-term trend of inflation is a cause for concern. The ECB’s decision next week will be closely monitored to assess its impact on inflation and future interest rate policies.
