Eurozone inflation dips slightly in June

BRUSSELS: Inflation in the eurozone fell back slightly in June to 1.9 percent, official data showed on Wednesday, but underlying upward price pressure remains of concern for investors.

In May, area-wide inflation had stood at 2.0 percent, the highest level since October 2018, according to the Eurostat agency.

The European Central Bank views the overall upswing in inflation -- which is fluttering around its target of "close to, but below 2.0 percent" -- as temporary, in line with other assessments around the world where central banks have embarked on ultra-loose monetary policy to counter the economic fallout from the coronavirus pandemic.

The Bank for International Settlements, for instance, on Tuesday said that higher consumer prices in Europe and the US "will most likely be temporary".

Policymakers argue that upticks in inflation are mainly one-off effects linked to post-lockdown reopenings and supply chain bottlenecks.

The Eurostat data covering the 19 EU countries using the euro showed that energy prices were the prime driver of inflation, jumping 12.5 percent in June, compared with 13.1 percent in May.

Non-energy industrial goods showed a 1.2 percent increase, against 0.7 percent in May. Food, alcohol and tobacco prices rose by 0.6 percent, after 0.5 percent in May.

The eurozone country registering the highest inflation was Estonia, with 3.7 percent, while consumer prices in Portugal actually declined by 0.6 percent.

In the big economies, inflation in Germany hit 2.1 percent in June, 1.9 percent in France, 1.3 percent in Italy and 2.4 percent in Spain.

The June data are likely to persuade the European Central Bank to leave its currently monetary policy stance unchanged for the time being.

Any tightening would require a durable rise in inflation following a period of robust economic growth.

However, several economists in Germany, Europe's biggest economy, see inflation in that country reaching between three and four percent this year, fuelling debate on when the ECB should start removing its stimulus.