London CNN –
Inflation in Europe slowed for the second straight month in June.
Consumer prices in the 20 countries that use the euro rose by 5.5% year-on-year, according to an estimate by the European Union’s statistics agency released on Friday. That’s down from 6.1% in May.
Economists polled by Portal had expected slightly higher inflation of 5.6% this month.
However, core inflation – which excludes volatile food and energy prices – edged up slightly.
The increase was due to a statistical anomaly, Christoph Weil, chief economist at Commerzbank, wrote in a note.
Price increases in June last year were artificially dampened by the temporary introduction of cheap public transport tickets in Germany, Europe’s largest economy. That meant prices looked significantly higher in June of this year.
“This effect will disappear again in September compared to the previous year,” said Weil.
Food, alcohol and tobacco prices remained the main drivers of inflation, rising 11.7% in June compared to 12.5% in the previous month.
High supermarket prices for staple foods have led to accusations of profits from food producers and retailers.
Sweden’s competition regulator said on Tuesday that egg prices had risen by “more than retailers’ costs justify,” but added that at the early stage of the investigation, there were no definitive conclusions conclusions could be drawn.
Jack Allen-Reynolds, a senior European economist at Capital Economics, said the European Central Bank is unlikely to stop raising interest rates to fight inflation, and forecasts another hike of a quarter of a point in July.
The central bank has raised borrowing costs for eight consecutive meetings since July last year. The key interest rate in the euro area is 3.5%, the highest since May 2001.
“With underlying price pressures likely to continue, we think there’s a good chance for another hike even at the following September session,” Allen-Reynolds said in a note.