Falling inflation prompts hopes for more ECB interest rate cuts
PRICE rises slowed again in April across the OECD, new figures showed yesterday, while government data also pointed to lower price pressures across Germany in May.
Slowing energy price rises are the largest contributor, and economists believe this gives the European Central Bank (ECB) more room to loosen monetary policy further if it wants to boost growth without pushing inflation further above target.
Annual inflation in the 34 countries of the OECD slowed to 2.5 per cent in April, down from 2.7 per cent in March, led by energy prices, which slowed from 6.5 per cent to 4.8 per cent, the lowest rate since August 2010.
Food price inflation also slowed from 3.5 per cent to 3.1 per cent.
German data showed inflation dropped to 1.9 per cent in May from 2.1 per cent in April, its lowest level since December 2010.
“More likely than not, the ECB will keep interest rates stable at next week’s ECB meeting remains unlikely, but should the Greek elections on 17 June not produce a stable pro-reform government, the ECB could act in early July,” said Berenberg Bank economist Christian Schulz.
“With lower German inflation, Germany’s Bundesbank may feel more comfortable with that.”