FRANKFURT: Easing inflation in major eurozone economies such as Spain and Franc is positive news, a key European Central Bank official said on Wednesday, but added it was too soon to declare victory.
Consumer price growth slowed to 5.1% year-on-year (YoY) in France in May, down from 5.9% a month earlier, initial figures showed Wednesday.
Meanwhile, Spanish inflation declined to 3.2% in May, mainly due to lower fuel costs, after hitting 4.1% in April, according to data released on Tuesday.
Luis de Guindos, ECB vice-president, told journalists that the data they had received yesterday and today was positive; it was a decline in headline inflation. But victory is still far away.
Other figures on Wednesday showed rates growth in Italy slowing to 7.6% from 8.2% in April — still well above the ECB’s 2% target.
Inflation in Germany
Inflation figures for Europe’s biggest economy, Germany, will be released at 1200 GMT.
Since last July, the ECB has raised interest rates by an extraordinary 3.75 percentage points to bring down rapidly surging consumer prices.
In Wednesday’s Financial Stability Review, the ECB warned that the higher prices affected consumers and companies.
Although the economic situation has “improved slightly” and energy rates have decreased, the report said that increased borrowing costs and stricter credit conditions are testing the resilience of firms and households in the euro area.
It found that demand for new loans, particularly mortgages, slashed sharply in the first quarter of 2023.
The report warned that if current rate “correction” in real estate markets could become disorderly if higher mortgage prices increasingly reduced demand.
It said that investment funds and financial markets were also vulnerable to disorderly adjustments, especially in renewed recession fears.
The report added that the outlook for euro area economic stability remains fragile.
The ECB is likely to announce another price hike in June.
