Deflation persists

Euro-zone consumer price inflation remained in negative territory in May for the second consecutive month and the eighth month overall in the last 18. Fading negative energy effects mean that inflation will turn positive in June and could rise close to the ECB’s target of below, but close to, 2% in the early months of 2017. However, with core price pressures likely to remain subdued, inflation should fall back later in 2017 and remain well below target in the medium-term.