Euro area’s headline inflation likely to have come below target level in June

Euro area’s final reading of the June inflation is set to release tomorrow. According to a DBS Bank research report, the final print is expected to point towards benign inflationary conditions, at 1.2 percent year-on-year. This would be lower than the target rate of 2 percent.

Oil prices have increased in the past few weeks, which might feed into modest pressures, but still be overshadowed by weak demand-side pressures. The ECB has already laid the ground for a dovish switch in the upcoming July policy review.

“The toolkit at this juncture primarily consists of a further reduction the deposit facility rate (might necessitate a tiered deposit facility concurrently), rate cuts, signaling a restart to asset purchases or expand the pool of investible assets, amongst others”, added DBS Bank.

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