The inflation issue in the Eurozone is being increasingly influenced by Germany, according to a Bloomberg survey. While consumer prices across the region rose 5.6% in June from a year earlier, down half a percentage point from the prior month, a core measure that strips out volatile elements such as energy probably accelerated. National numbers are also likely to show a surge in German headline inflation thanks to the rollout of ultra-cheap public transport last summer, which added 0.2 percentage point to the overall reading for the Eurozone.
While Eurozone policymakers will convene for an annual retreat in Portugal next week to share their dismay with global counterparts, the divergence between the region's members is complicating the picture. Germany's outlook seems less benign than the rest of the region, with the Bundesbank's forecast for inflation in its own economy standing at 2.7% compared to 2.2% for the Eurozone as a whole.
However, the next three biggest economies in the Eurozone are all anticipated to show a significant slowing of inflation. Italy is due to report on Wednesday that headline price growth has eased by 1.2 percentage point to 6.8%. France, whose number is published on Friday, is anticipated by economists to moderate by 0.6 percentage point to 5.4%.
The most significant slowdown is anticipated in Spain, which releases data on Thursday. Forecasters predict a slump in the inflation rate to 1.4%, significantly below the ECB's 2% target. Spanish Economy Minister, Nadia Calvino, believes that while the situation may not require more rate hikes, the ECB is looking at Europe as a whole. It remains to be seen how the central bank will respond to these changing inflation patterns, and whether it will take Germany's more hawkish outlook into account.