The firm said eurozone inflation accelerated in May, with consumer prices increasing 0.3% year on year, following no change in the previous month.
The improving economy, the weaker euro, and higher oil prices should drive further inflation in coming months, the company said.
“Oil deflation eased, while food price growth accelerated in May. The price of Brent crude oil increased to $65 per barrel at the beginning of June from the low of $45.20 on January 13,” said Tomas Holinka, economist at Moody’s Analytics.
“Although oil prices should continue to increase later this year, the price growth will be moderate. Nevertheless, the weakening euro, which has depreciated around 20% against the dollar since March 2014, will likely push up import prices, contributing to higher inflation,” he added.
“The improving economy should drive up inflation in coming months. May’s final PMI Composite Output Index remained close to April’s 12-month high of 53.9, signaling ongoing improvement in business activity,” Holinka said. “The euro zone economy is predicted to increase by 0.4% in the second quarter, based on the PMI survey, following 0.4% growth in the first quarter. Low oil prices will boost domestic demand, which remains the key driver of the recovery, while Europe’s exporters should benefit from the weaker euro.”
