Consumer price growth stumbled below economists’ expectations, recording 1.2 percent year-on-year in May from 1.7 percent in April. This fell short of anticipations of 1.3 percent for the 19 countries sharing the euro. The ECB wants to keep inflation below, but close to, 2 percent over the medium term and will discuss policy next Thursday. ECB policymaker Olli Rehn said at the end of May the bank was ready to reintroduce monetary support measures if required, amid market concern over the eurozone’s economic slowdown.
Mr Rehn said, blaming the US-China trade war for weakening confidence: “We now have a soft patch in the economy and we are analsing whether this is a genuine soft patch or a more of a long lasting economic slowdown.
“If things turn south and we face a recession we are ready to use all instruments.”
While a eurozone recession was not currently the central scenario, an ample degree of policy stimulus remained appropriate, Mr Rehn said.
Eurostat data showed unprocessed food price growth halved in May from April to 0.4 percent year-on-year while energy price growth slowed to 3.8 percent year-on-year form 5.3 percent in April.
The core inflation measure the ECB looks at in policy decisions that excludes these volatile components was 1.0 percent in May against 1.4 percent in April.
The slower price growth comes despite the euro zone recording its lowest unemployment rate in 10 years, which in April fell to 7.6 percent of the workforce from 7.7 percent in March — a rate unmatched since August 2008.
Eurostat said 12.529 million people in the eurozone were unemployed in April 2019, 64,000 fewer than in March and 1.147 million fewer than a year earlier.
Bert Colijn, Senior Economist at ING Bank, said: ”This will no doubt make some ECB board members a little hot under the collar, as pressure to take action is mounting.
“At the April meeting, it was already mentioned that price pressures remain uncomfortably low, which has certainly not improved since then.
“Expect a dovish tone from the ECB on Thursday.”
Persistently low inflation across the developed world has prompted a debate about central bank policy and the effectiveness of inflation-targeting.
ECB President Mario Draghi is due to stand down, with calls rising for his successor to get a grip on rates.