Inflation in Greece moved upward during June, according to preliminary data published Tuesday by Eurostat, reaching 3.6% on an annual basis, compared to 3.3% in May. This increase maintains our country’s divergence from the general trend in the eurozone, where average inflation rose marginally to 2% from 1.9% in the previous month. The convergence of European economies toward the 2% target set by the European Central Bank is not following the same pace everywhere. In May, the gap between Greece’s inflation and the rest of the eurozone had widened significantly, as our country recorded a jump from 2.6% in April to 3.3%, while in the eurozone the index slowed slightly to 1.9% from 2.2%.
Inflation: ECB ready for action on any deviation
In its new strategy for the next five years, the European Central Bank reaffirms its commitment to react dynamically to both overshooting and undershooting of inflation relative to the target. “To maintain the symmetry of the target, appropriately forceful or persistent monetary policy action is important as a response to large, lasting deviations of inflation from the target in either direction,” the ECB’s new strategy characteristically states.
As the central bank evaluates the performance of eurozone countries, Greece continues to stand out with persistently higher inflation, a fact that raises questions about domestic pressures on the cost of living and the sustainability of household purchasing power.
Germany: Slowdown to 2%, below forecasts
In Germany, annual inflation unexpectedly declined to 2% in June, from 2.1% in May. This result was lower than analysts’ forecasts which predicted a 2.2% increase. The stabilization of inflation in Europe’s largest economy at the ECB’s target level strengthens the assessment that new interest rate cuts are imminent.
As Francisca Palmas, economist at Capital Economics, commented, the latest data from eurozone countries is encouraging for the ECB and supports the scenario of further monetary easing.
Small increases in France and Spain
Conversely, inflation showed mild increases in France and Spain, without causing concern at the European Central Bank. In France, consumer prices increased by 0.8% annually in June, from 0.6% in May – the lowest level in four years. Despite the increase, the rise was marginal and slightly above estimates.
In Spain, inflation reached 2.2%, in line with forecasts. Although the data shows mild price increases, ECB officials believe the general trend supports achieving the 2% target within 2025.
