While euro-zone headline CPI inflation fell to 1.3% in June, the core rate, which excludes the volatile food and energy components, rose from 0.9% to 1.1%. This left it above the 0.8% average recorded since the start of 2014, suggesting that underlying price pressures are finally mounting. However, available national data on services inflation suggest that the rise was largely confined to Germany. Elsewhere, particularly in France, core inflation seems to have remained weak, presumably reflecting the remaining slack in the economy. What’s more, the still high rates of unemployment and low levels of inflation expectations in France, Italy and Spain suggest that price pressures outside Germany will remain subdued.
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