Brussels (Reuters) - inflation in the Euro zone slowed in may largely through lower prices, but the dip is likely to be temporary, and the European Central Bank to increase rates in July will not stop.
European Union Eurostat statistics office estimates that inflation in 17 countries, with the euro was 2.7% on the year this month, compared to 2.8% in April.
Economists surveyed by Reuters had expected inflation to stay at 2.8% on the year. The ECB wishes to limit the growth of prices slightly less than 2.0% in the medium term.
"I think that they are still on the objective of increasing by a further quarter point interest rates this summer, probably in July." "Then I think we will get one this year bringing the refi rate to 1.75%", said Martin van Vliet, an economist at ING.
The ECB has raised interest rates of 25 1.25% basis points in April to try to stem inflationary pressures in the euro area, following a strong increase in raw material prices.
There is no rupture or monthly data with Eurostat inflation estimate, but economists said that once more the details were published in June, they are likely to show that prices of energy has a strong following a decrease in the price of oil.
Food prices were likely to be again on the rise, but core inflation, which excludes volatile energy costs and non-processed, food was likely to have facilitated.
"Seasonal will help maintain core inflation under control in the next few months, but the underlying trend in core inflation is upward, reflecting the gradual transmission of prices rising, the chain of the formation of prices, said Eoin O'Callaghan, an economist at BNP Paribas.".
"The ongoing moderation in economic activity probably reduce some of these pressures but will not change the overall picture." We anticipate that core inflation to reach 1.7% year on year in December, from about 1.5% this month and 1.1% in December 2010, "he says.
"Global inflation, overall, is should culminate over 3% in the fourth quarter."
Eurostat said that the rate of unemployment in the euro area remained unchanged at 9.9% of the population active in April for the third month, despite the small declines in the number of unemployed in Germany, France and Italy.
He said 15.529 million people are unemployed in the euro area in April, 115 000 less in the previous month and 457,000 less than a year earlier.
"With growth currently euro area showing signs of losing some momentum, the suspicion remains that euro-zone unemployment will trend only gradually in the coming months," said Howar Archer, Economist at the IHS Global Insight. "."
"The employment situation continues to significantly vary depending on the region, with the improvement of Germany labour markets and other economies of eurozone North contrasting core with unemployment remains very high in the countries of the periphery struggling," he said.
(Additional reporting by Luke Baker in Brussels and Scott Barber in London)
(Statement by Jan Strupczewski, mounting by Rex Merrifield)
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