The eurozone inflation rate has been dropping but has not yet reached the target.

The Consumer Price Index (CPI) for the eurozone, announced on June 16th, matched the expectations at 6.1%. Although the CPI has been consistently decreasing, it is still far from the target of 2%. Therefore, it is anticipated that the European Central Bank (ECB) will need to increase interest rates in the coming months.

Mr. Christine Lagarde, the President of the European Central Bank (ECB), reiterated that the ECB would adjust interest rates again next month before making further decisions based on economic data, which will be announced at the end of this month.

Mr. Peter Kazimir, the Governor of the National Bank of Slovakia and a member of the ECB's Governing Council, stated that the ECB should raise interest rates again next month due to the increasing risk of inflation. He said, "We need to raise interest rates again next month and continue moving towards a restrictive policy. Continuing with a tight monetary policy is the only appropriate way forward in the future."

The anticipation of an increase in interest rates has led to a rise in the yield of German 10-year government bonds (DE10YT), which is a benchmark for the eurozone. It has increased by 0.5 basis points (bps) to 2.47%. Major global investment banks have adjusted their forecasts, with the final interest rate projection for the ECB in September being 4%.

The Italian 10-year government bond yield, which is a benchmark for the non-euro area, has increased by 1.5 basis points (bps) to 4.05%. This has led analysts to predict that several mutual funds will return to buying debt securities to achieve higher returns than before, particularly focusing on Italian government bonds that offer attractive yields.

However, it is important to note that raising interest rates too quickly may not directly address the issue of inflation. It is projected that the inflation rate in the eurozone will exceed the ECB's target of 2% until 2025, due to the previous increase in energy prices impacting the overall economy. This has led to increased prices for all goods and services, further pushing up wages.

Cristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), recently argued that the ECB should prioritize tackling inflation but should exercise caution and adopt comprehensive monetary policies to avoid a severe economic downturn.

Technical analysis data (5H)

Resistance: 0.9163, 0.9171, 0.9177

Support: 0.9149, 0.9143, 0.9135

Source: Investing.com