What odds now for 50bp next week?
[broken link removed]
Euro zone inflation pressures 5yr high - report
Last updated: 02-06-06, 12:04
Rising inflation in Germany and France pushed underlying price pressures in the euro zone to 5-1/2 year highs in April, according to an index published by the Economic Cycle Research Institute today. ECRI, which designs indices aimed at predicting business cycles, said its Eurozone Future Inflation Gauge (EZFIG) rose to 103.4 in April from March's 102.2.
"With the EZFIG rising to a 5-1/2 year high in its latest reading, euro zone inflation pressures are clearly in a cyclical upswing," ECRI said in a statement.
Latest official euro zone data showed annual inflation rose by a sharper-than-expected 2.5 per cent in May, while a report from the European Commission showed a strong rise in consumers' inflation expectations last month.
The European Central Bank is widely expected to raise interest rates by 25 basis points on June 8th, but the recent data have increased the probability that the bank may raise rates more aggressively, by half a percentage point.
The ECRI gauge aims to anticipate cyclical swings in the region's inflation rate and changes in official interest rate policy by measuring underlying inflationary pressures, rather than actual inflation rates.
The euro zone gauge uses a weighted average of ECRI's indices for Germany, France, Italy and Spain, whose components include measurements of bond yields, loans to individuals and businesses, raw material prices, employment and unemployment, money supply and business activity.
The German index jumped to 91.5 from 87.2 in March, whilst the French one rose to 103.5 from March's 103.1.
In contrast, the gauge for Italy dipped to 101.2 from 101.5 and the Spanish index eased to 154.3 from 159.8.
"The (German) index was pushed up by inflationary moves in measures of materials prices, money supply, orders and loans, partly offset by disinflationary moves in measures of interest rates and import prices," ECRI said.