The view that the unprecedented inflationary crisis that has hit the eurozone is on the decline is strongly reinforced by the latest data showing consumer prices in Spain falling to a two-year low and a 13.3% “fall” in industrial producer prices in Greece. . Combined with the May economic sentiment index raising growth fears, the view that fewer ECB rate hikes are now warranted is gaining support among analysts and investors.

Data in Spain showed inflation at 2.9% in May, the lowest since July 2021, as fuel costs fell and food price increases were limited. Inflation showed a marked decline compared to April’s 3.8%, but also the 3.3% expected by analysts.

The announcements from Spain are the first in a flurry of inflation data expected these days. Today, on Wednesday, inflation will be announced in France, Italy and Germany, and later in the day Eurostat data for the entire Eurozone. Market forecasts suggest that annual inflation in the euro area will fall to 6.3% from 7% in April.

Structural inflation is being monitored by the ECB, and the view is growing that a smaller increase in interest rates is now justified.

Of course, ECB officials are now looking more at structural inflation than the general consumer price index to make interest rate decisions. And analysts expect at least two more rate hikes of around 25 basis points.

According to some estimates, the rate hike could continue until September, which would lead to an increase in the ECB deposit rate to 4% from 3.25% today to bring inflation back to the 2% target.

However, a number of figures show the damage caused to the economy by higher interest rates. Business sentiment in the euro area fell to its lowest level since February 2021, and the M3 cash flow index fell to 1.9% in April from 2.5%. Spanish inflation data pushed up European bond prices, signaling market hopes for a smaller ECB rate hike.

“We believe we have yet to go through monetary tightening, although we also believe we are nearing the end,” Spain’s central bank governor Pablo Hernandez de Cos said on Monday.