Eurozone inflation slowed more than expected to a 15-month low in May, flash estimates from Eurostat showed Thursday.
Annual inflation fell to 2.4 percent from 2.6 percent in April. The rate was slightly below the expected rate of 2.5 percent.
The statistical office is set to publish final data on June 14. The slowdown in inflation will help to reduce the squeeze on purchasing power, supporting spending and growth.
Nonetheless, inflation continues to stay above the European Central Bank's 'below, but close to 2 percent' target.
Policymakers of the European Central Bank will meet on June 6. In May, the Governing Council led by Mario Draghi kept the interest rates unchanged for the fourth month in a row. The key rate remains at a record low 1 percent.
Moderating inflation, sharply lower oil prices, slowing money supply growth, weakening consumer inflation expectations and moderating business pricing expectations indicate that inflation risks are easing appreciably, IHS Global Insight Chief European Economist Howard Archer said.
As such the ECB has more scope to take interest rates lower. However, Archer expects a rate cut only in the third quarter, with July a very real possibility.
Elsewhere, Ben May, European Economist at Capital Economics said if the euro continues to depreciate, leading to higher import price inflation, headline CPI inflation could fall rather more slowly, heaping further pressure on the region's struggling households.
Yesterday, European Commission recommended that the Eurozone's permanent bailout fund must be given authority to directly recapitalize the troubled banks. Allowing direct bank recapitalization will serve as a link between banks and their national governments, the EU said.
Today, Draghi called for centralization of financial sector regulations. Spain's Bankia crisis taught the lesson that the supervision of bank which has potential to risk the entire Eurozone financial system should be vested with a centralized authority, he told the European Parliament on Thursday.
Further, Draghi said European leaders should clarify their vision for the region for the years ahead.
by RTT Staff Writer
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