- ORIGINAL NEWS
Euro zone inflation steady at 2.4%, keeping June rate cut in play as economy returns to growth
- SUMMARY
The euro zone economy has shown signs of improvement, as inflation remained steady and the economy returned to growth in the first quarter of 2023.
Headline inflation in April was 2.4%, matching expectations and remaining below 3% for the seventh consecutive month.
Core inflation, excluding volatile items like energy and food, eased to 2.7% from 2.9% in March.
The slowdown in core inflation was driven by a lower impact from energy price decreases.
Service prices, closely monitored by the European Central Bank (ECB), also cooled to 3.7% from 4%.
Meanwhile, the euro zone economy rebounded with 0.3% growth in the first quarter.
However, this was slightly better than expected and offset a revised contraction of 0.1% in the fourth quarter of 2023, indicating a technical recession in the second half of last year.
Market expectations point to an interest rate cut by the ECB at its next meeting in June.
Several ECB members have expressed the need to prevent an economic slowdown, while acknowledging risks from oil prices and geopolitical tensions.
Analysts note that while a June rate cut seems likely, the ECB’s cautious approach to easing remains uncertain beyond that date.
Strong core inflation and improving growth data suggest a less urgent need for aggressive monetary policy accommodation.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“Price rises in the euro area held steady at 2.4% in April, while the economy returned to growth in the first quarter, according to flash figures published Tuesday.”
“Gross domestic product meanwhile rose by 0.3% over the first three months of the year, slightly better than consensus economist expectations.”
Negative
“Inflation has been below 3% for the seventh straight month, despite a slight rebound in the rate in December due to energy prices.”
“GDP for the fourth quarter of 2023 was revised from no growth to a 0.1% contraction, which means that the euro zone was in a technical recession in the second half of last year.”