Eurozone inflation edges back into positive territory in June

Eurozone inflation moved back into positive territory in June, increasing for the first time since January, according to data released on Thursday.

Consumer prices moved up 0.1 per cent, after falling 0.1 per cent in May, the EU statistics agency Eurostat said in a preliminary estimate.

The figure exceeds analysts' expectations that prices would remain unchanged, but remains far below the ECB's inflation target of just below 2 per cent.

Earlier this month, the Frankfurt-based bank started buying investment-grade corporate bonds as part of a 1.74-trillion-euro (1.93-trillion-dollar) stimulus package aimed at ending weak consumer prices and keeping the 19-member eurozone on an economic growth path.

The June return to price growth will likely be considered a "positive sign" in Frankfurt, said ING Bank analyst Bert Colijn, adding that it "gives the ECB some time to assess the impact of the British EU referendum more thoroughly as things unfold."

British voters opted last week to leave the European Union, triggering market volatility amid uncertainty over the impact this will have. Britain is not a member of the eurozone but is an important trading partner.

"Uncertainty over the effects of Brexit could add to downward pressure on wage growth and increase firms' reluctance to raise theirprices in the coming months," said Jennifer McKeown of the Capital Economics think tank.

Eurozone inflation has hovered around the 0-per-cent mark in recent months, as fears of deflation have dogged the currency area. European officials have argued that external factors such as oil prices have kept rates low, rather than across-the-board drops in price levels.

Energy prices continued to fall in June, by 6.5 per cent, after dropping by 8.1 per cent in May, Eurostat found.

This was offset by gains in prices for food, alcohol and tobacco products, as well as for services and non-energy industrial goods.

Last update: Thu, 30/06/2016 - 14:12
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