Expectations for core inflation have been shattered as costs in the service sector grow
© Fabian Sommer/picture alliance via Getty Images
Core inflation in the euro area accelerated and stayed stubbornly high in June, a preliminary reading revealed on Friday.
Head inflation in the 20 countries that share the euro hit 5.5% this month, coming in slightly lower than analyst projections. But core inflation, which excludes energy and food, remained high and surged to 5.4% as price growth in the service sector also rose to 5.4%, up from 5.0% recorded in April.
“The core rate is likely to remain well above the 5% mark in the next months which will [require] further rate hikes by the ECB,” said Ulrike Kastens, an economist for Europe at DWS.
Although the Eurozone’s core inflation eased somewhat from 5.6% in April to 5.3% in May, the latest deterioration may eclipse an improvement in the headline inflation gauge, economists warn.
“Base effects and statistical distortions are likely to keep the core reading elevated over the next couple of months and see the ECB hiking at least until September,” said Bloomberg’s senior economist, Maeva Cousin.
READ MORE: German consumers hit by runaway prices
Consumer price growth will be closely monitored by the European Central Bank, which hiked interest rates to their highest level in 22 years on June 15. The regulator moved the benchmark rate by 25 basis points to 4%, in a ninth consecutive rate hike.
For more stories on economy & finance visit RT’s business section
