The European Central Bank is expected to begin cutting eurozone interest rates from historic highs this week, but sticky inflation means the move is unlikely to kickstart a rapid easing cycle.
Investors will be keenly watching to see if ECB president Christine Lagarde provides any guidance about the pace of cuts going forward. Photo: Kirill KUDRYAVTSEV / AFP/File
The Frankfurt-based institution launched an unprecedented hiking cycle in mid-2022 as energy and food costs surged following Russia's invasion ofAfter 10 consecutive increases, it has kept rates on hold since October, but steadily slowing inflation means a cut is now on the horizon, which would alleviate pressure on the beleaguered eurozone.
Data released on Friday showed that inflation in the 20 countries that use the euro rose in May, and faster than expected -- to 2.6 percent on year, up from April's 2.4-percent increase.Officials are particularly concerned about strong price rises in the service sector as well as continued robust wage growth, as workers clinch big pay rises to compensate for inflation.
"Several policymakers have been keen to stress that even if the bank cuts rates -- which is still likely -- it will be in no rush to cut again in July," its next meeting, he said.Investors will be keenly watching to see if ECB president Christine Lagarde provides any guidance about the pace of cuts going forward in her post-meeting press conference.
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