Inflation in the eurozone slowed to the lowest level since Russia invaded Ukraine, supporting the case for the European Central Bank (ECB) to stop raising interest rates.
Inflation in the 20 countries that share the euro currency eased to 6.1% year-on-year (y-o-y) in May from 7% y-o-y in April. The reading came in better than consensus, which was 6.3%.
This was the lowest rate since February 2022, when inflation was 5.9%. Core inflation, which excludes volatile items like energy, food, alcohol, and tobacco prices, slowed moderately to 5.3% y-o-y from 5.6% y-o-y in the previous month.
Even though headline inflation benefited from the recent decline in energy and food prices, the ECB is envisaging more interest rate hikes in order to bring inflation to its 2% medium target as core inflation remains stubbornly high.
Meanwhile, the UK housing market is showing signs of stress as mortgage lending fell to its lowest monthly level on record, and house prices fell at the fastest annual rate in 14 years.
House prices in the UK fell by 3.4% y-o-y in May. Compared to April, the house prices fell by 0.1%, with the average cost of a UK home now estimated at £260,736. Mortgage rates have risen sharply recently on expectations that the Bank of England will continue with interest rate hikes as inflation remains stubbornly high.
Finally, in the US, home prices increased slightly in March, registering a gain for the second month in a row, according to the latest S&P CoreLogic Case-Shiller US National Home Price Index, released on Tuesday.
The index gained 0.4% in March compared to February, the second consecutive month of gains. The index was up 0.7% compared to March of last year.
For the month, the 10-City Composite Index, which includes the Los Angeles and New York metropolitan areas, added 0.6%, and the 20-City Composite Index, which includes Dallas-Fort Worth and the Detroit area, was 0.5% higher.
“Two months of increasing prices do not a definitive recovery make, but March’s results suggest that the decline in home prices that began in June 2022 may have come to an end,” said Craig J. Lazzara, managing director at S&P DJI.
This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).