2016.06.1607:30:00UTC+00Eurozone may Cpi Improves, Though Still in Deflation

The Eurozone’s consumer price index for the month of May improved, although it remained in a state of deflation. Sixteen countries in the EU remained in negative mode, with Romania leading the index, with the highest growth being observed in Belgium.

Eurostat reported that annualized inflation rose in May, in line with previous estimates. CPI was -0.1 percent y/y, up from -0.2 percent y/y in April. Negative annual inflation rates were experienced in sixteen of the EU member states, with Romania leading the way at -3 percent, while the highest growth rate was seen in Belgium at 1.6 percent.

From April to May, CPI grew at a pace of 0.4 percent, quicker than the 0.3 percent expected. Inflation fell in nine member states. Stripping out volatile food and energy prices, the 'core' CPI data was at an annualized growth rate of 0.8 percent, up from the April reading of 0.7 percent. Core CPI rose 0.2 percent m/m, compared to 0 percent in April.

However, negative interest rate in the Eurozone has failed to stall hopes of inflation in the area, although President Mario Draghi has repeatedly said that he and other senior bank officials are convinced that the measures are working.

The central bank has expressed it wants to follow a wait and see approach with current monetary policy before making any further adjustments. However, inflation has remained in negative territory during the first half of 2015, but after rising in the second half of the year, it has weakened again in 2016.