All eyes remain on inflation and central banks’ policy decisions to tame it. The ECB will be watched closely this month as the interest rate is expected to rise for the first time in 11 years. President Lagarde anticipated at the June meeting a rate hike of 25 basis points for July, but some members of the Governing Council are in favor of a 50 basis point hike already in July. At the ECB Forum in Sintra, Council members Kazaks and Simkus, respectively the Governor of the Bank of Latvia and the Chairman of the Board of the Bank of Lithuania, said in a separate interview with Bloomberg that a half percentage point increase in July is an option to consider.
High inflation and aggressive monetary policies are weighing on the markets, as the war in Ukraine continues. The final Consumer Confidence data in the Euro area for June 2022 was confirmed by the European Commission at -23.6, the lowest since April 2022. Households’ expectation about the general economic situation also drastically fell. This sentiment was reflected by the freshly released inflation data by Eurostat.
The annual consumer price index jumped to 8.6% in June 2022, reaching a new record high by surpassing last month’s reading at 8.1%. The flash estimate is also higher than market forecasts of 8.4%. Estonia (22.0%) and Lithuania (20.5%) continues to be among the EU countries with the highest annual inflation rates. Malta (6.1%) and France (6.5%) registered the lowest rates. Prices rose faster for energy (41.9%) and food, alcohol & tobacco (8.9%). Core inflation was 3.7% in June, easing from 3.8% in May.