Interest rate cut coming on Thursday, chief economist confirms

Inflation figures for the euro area were somewhat disappointing.

That’s what he says Savings Bank Group Chief Economist Henna Mikkonen.

Core inflation in the euro area, according to figures released on Friday It was 2.9 percent in May. This was 0.2 percentage points higher than the consensus expectation of experts.

Annual inflation rose 0.2 percent to 2.6 percent. This is also a slightly higher reading than expected.

Henna Mikkonen said signs of rising inflation came from Germany earlier this week. There is only one reason why inflation has risen somewhat.

“I’m not panicking yet, but it’s undoubtedly a slight disappointment again. We’re playing with decimals here, and the direction is towards interest rate cuts.”

Inflation figures aren’t all that bad, and the ECB’s forecast rate cut for next Thursday would have been cancelled.

“Also, we will see how many interest rate cuts there will be at the end of the year. All the while, the picture is getting more detailed,” says Henna Mikkonen.

Mikkonen estimated that there could be a total of 2-3 interest rate cuts this year, meaning that after next Thursday, the ECB could cut the key interest rate 1-2 times.

Good news too

On Thursday and Friday, there were more positive readings than inflation numbers from the euro area.

The unemployment rate in the euro area was lower than forecast at 6.4 percent in April. In May, consumer confidence improved as expected, and industrial confidence nearly matched the forecast.

According to Henna Mikkonen, the numbers show shaky growth, but the direction is great. This is good news for Finland.

“Our economic forecast for Finland is based on the fact that a cautious recovery is taking place,” says Mikkonen.

According to Mikkonen, two things are needed throughout the year in terms of economic growth in Finland.

“First the global economy is improving and the euro area economy is recovering. Second, interest rates should come down this year.”

Finland is a country that is sensitive to interest rates, which is why the fall in GDP is relatively large in Finland.

“What happens to interest rates in Europe is important in terms of Finland’s growth prospects.”

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