Euro zone inflation stuck to the European Central Bank's (ECB) target level in June, data showed today.
Annual inflation in the 13 countries using the euro remained unchanged at 1.9 per cent in June, as expected, European Union statistics office Eurostat said today.
However, price rise expectations rose, and business morale remained strong, making higher interest rate seem more likely.
The ECB aims to keep inflation below but close to 2 per cent. Price growth has remained at that level since September 2006, but ECB officials say the bank must stay vigilant to medium-term inflation developments.
Analysts expect the ECB to leave interest rates on hold next week after eight rises in the last 18 months, but most see it raising rates again to 4.25 per cent after the summer break.
Some say the ECB will probably have to increase benchmark rates even further, given the outlook for continued strong growth in the euro zone. Strong growth of money supply in May, reported yesterday, reinforced that view.
The monthly European Commission survey showed economic sentiment in the euro zone edged down to 111.7 in June, as expected, from May's revised 112.1. But the reading was still higher than in many previous months.
In the euro zone, consumer sentiment, long the weakest point in monthly Commission surveys, declined to -2 in June from -1 in May. Economists had expected it to remain unchanged.