Olli Rehn, member of the European Central Bank (ECB) Governing Council and Bank of Finland Governor, said consumer inflation is likely to continue to decline. At the same time, he added that the ECB's interest rate cuts would also contribute to economic recovery.
According to official data, the eurozone annual inflation accelerated in May for the first time in five months, and exceeded economists' forecasts. Meanwhile, core inflation also accelerated in May - for the first time in 10 months - after reaching its lowest level since February 2022 in April. According to the report, the consumer price index rose by 2.6% per year after increasing by 2.4% per annum in April. Economists expected an increase of 2.5%. Meanwhile, on a monthly basis, the consumer price index rose by 0.2%, slowing compared to April (+0.6%). The core consumer price index - excluding energy, food, alcohol & tobacco - rose by 2.9% per year after an increase of 2.7% per year in April. Economists had expected an increase of 2.8% per annum.
"I believe that if there are no new shocks in the economy, the ECB may reduce the interest rate by another 1-2% in the next few years," Rehn said after the ECB cut rates by 0.25% yesterday, but gave no indication as to whether that would be followed by a further easing in July.
Meanwhile, Bundesbank President Joachim Nagel said that yesterday's ECB decision was not premature, but a logical step after a decrease in inflation. Nagel, however, stated that the ECB was not on autopilot and still acting restrictively despite the rate cut.