Slower Inflation in Finland: A Look at Consumer Prices and the European Central Bank’s Rate Cut Decision

Finland’s consumer prices rose by 0.6 percent in June compared to the same month last year, with a slight increase from May’s inflation rate of 0.5 percent. Despite this, food and non-alcoholic beverages became cheaper by 0.4 percent, while housing, water, electricity, gas, and other fuels decreased by 0.9 percent. Alcoholic beverages and tobacco were 4.3 percent more expensive compared to last year, and clothing and footwear saw a 3.4 percent increase in prices. The cost of education rose the most at 7.9 percent.

The harmonized consumer price index measures inflation without including owner-occupied housing, gambling, or interest on consumer loans. The slow inflation rate in Finland has led to increased consumer confidence in the economy. However, business economist Roope Ohlsbom suggests that the interest rate level set by the European Central Bank is still too high for Finland, leading to lower demand and falling below the inflation target.

In the Euro area, consumer prices rose by 2.5 percent year-on-year in June, with core inflation remaining at 2.9 percent. The recent inflation figures meet expectations, with a focus on service prices which have contributed to rising costs.

However, there is uncertainty about the future rate cuts in the euro area as markets expect one or two more cuts this year.

Analysts suggest that the ECB will monitor price pressures before making any decisions on interest rates.

The next expected interest rate cut of 0.25 percentage points is predicted for September followed by another cut in December.

This outlook is subject to change depending on inflation trends and economic conditions.