Tue, July 02, 2024 at 10:26

• 

  Kang-hoon

  • Hello Annie, today I have some news regarding consumer prices in the eurozone.

  • According to Eurostat, consumer prices rose by 2.5% in June compared to a year earlier.

  • 
• Annie

  • Oh, that's interesting!😊 How does this compare to the previous month?

  
• 

  Kang-hoon

  • In May, the increase was slightly higher at 2.6%.

  • So, the June figure is 0.1 percentage point slower.

• Annie

  • I see.

  • Is this in line with what experts were expecting?

  
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• 

  Kang-hoon

  • Yes, it is.

  • The increase was in line with consensus estimates.

  • Bloomberg noted that this is a sign that inflation is gradually moving closer to the European Central Bank's (ECB) medium- to long-term target of 2%.

• Annie

  • So, does this mean inflation is under control now?🤔

  
• 

  Kang-hoon

  • Not entirely.

  • The underlying inflation rate, which shows the core trend in prices, remained unchanged at 2.9% from May.

  • This indicates that while headline inflation is slowing, core inflation pressures persist.

• Annie

  • Hmm, that's a bit concerning.

  • What does this mean for the ECB's interest rate policy?

  
• 

  Kang-hoon

  • The ECB is likely to be cautious about cutting rates anytime soon.

  • Last month, they lowered the key interest rate to 4.25% from 4.50%, but further cuts seem unlikely in the near term.

• Annie

  • Did ECB President Christine Lagarde say anything about future rate cuts?

  
• 

  Kang-hoon

  • Yes, she did.

  • Just yesterday, at the annual policy conference in Sintra, Portugal, she emphasized that 'our work is not done and we must remain vigilant.'

  • She indicated that it will take time to gather enough data to be confident that the risk of inflation above target has passed.

• Annie

  • So, markets are expecting the ECB to keep rates unchanged at the next meeting?

  
• 

  Kang-hoon

  • Correct.

  • Her comments were interpreted as a hint that the central bank will keep rates unchanged at its next monetary policy meeting on April 18th.

• Annie

  • Got it.

  • So, overall, would you say this news is good or bad for the market?

  
• 

  Kang-hoon

  • I would classify this as bad news.

  • 

  • The persistence of underlying inflation suggests that the ECB will maintain a cautious stance, which could mean tighter monetary conditions for longer.

  • This is likely to weigh on economic growth and market sentiment in the short term.

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.