The basic inflation jump in the euro area does not see a lower price rate

Written by Balz Karani

Frankfurt (Reuters) -The price of the Euro region has increased more than expected last month and accelerating the basic price pressures, which is still a welcome trend that is still expected to prevent the other interest rate to be reduced to isolating the economy from the repercussions of a global trade war.

Inflation in the twentieth countries that participate in the euro currency, which was held by 2.2 %, and exceeding expectations by 2.1 % in the Reuters poll for economists, as price growth in services and unspecified foods compensates for low energy costs.

The high rates of services increased to the rise in basic or basic inflation, which excludes the prices of flying food and energy, to 2.7 % than 2.4 %, higher than expectations from 2.5 %, indicating that local price pressures are higher than thought.

While the European Central Bank of Politics usually focus heavily on inflation publications – especially the rise in basic prices – the American administration’s trade war with the rest of the world may be much important in the period before the political meeting on June 5.

“The high level of uncertainty about the growth expectations of the global region and the euro means that the European Central Bank may not pay great attention to the higher inflation numbers from April at its meeting in June,” Economists in Norweyeh said in the memorandum.

In fact, financial investors still see about 85 % of the price reduction on June 5, then at least another step before the end of the year, which would send the European Central Bank’s deposit rate to 1.75 % or less.

However, it is possible that the high prices of calls by calling by political falcons to slow the pace of policy reduction before there is decisive evidence to reach the goal.

Political makers who speak inside and outside the registry also started paving the way to reduce the rate of eighth of the European Central Bank in 13 months, as the trade war will affect prices and can withdraw inflation without the target.

In fact, the bank’s connection has already turned. While the European Central Bank earlier saw inflation again in the target only in 2026, politicians now say the goal may be achieved mainly.

This is because the commercial conflict slows economic growth and invests, and has already pushed low energy prices and the strengthening of the euro, making imports cheaper. Moreover, many fear that China can start throwing its excess products on Europe, given its limited arrival in the United States

“The increase today in the basic component does not change the view, which has become more intense,” said Ricardo Marceli Fabiani in Oxford.

He said: “The disturbances in the financial markets have led to growth concerns a significant decrease in international oil prices, which will not only reduce energy enlargement, but also means cheaper inputs to produce goods.”

While the most fragmented global economy can eventually increase production costs, these upward risks are seen as somewhat limited, and long -term inflation expectations for investors maintain a company about the goal of the European Central Bank by 2 %.

Economists say more spending on defense can enhance prices because this must increase the budget deficit, but any such spending is still fine and may have a limited impact on prices.

(Participate in the Balazs Koranyi report; edited by Hugh Lawson)