The marked fall in Eurozone's producer price inflation in May reinforces belief that the European Central Bank has ample scope to take interest rates lower to try and give at least a limited boost to the struggling economy, IHS Global Insight Chief UK and European Economist Howard Archer said Tuesday.
According IHS Global Insight, the ECB is likely to reduce its policy interest rates by 25 basis points to 0.75 percent at Thursday's meeting.
Latest data show that inflationary pressures are easing in the Eurozone. Weakened manufacturing activity is causing companies to be circumspect in their pricing policy to try and generate business, while lower prices, mainly resulting from the retreat in oil prices, is giving manufacturers increased scope to reduce their prices, the firm said.
Data from Eurostat today showed that producer price inflation slowed to 2.3 percent in May from 2.6 percent in April. Sequentially, output prices dropped 0.5 percent, reversing the previous month's 0.1 percent rise. The decline in prices was driven by a fall in energy prices owing to the sharp retreat in oil prices.
Core output price inflation eased to 1.1 percent in May from 1.3 percent in April, while prices remained flat month-on-month.
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