On the downside, although oil prices have declined somewhat recently, they remain at high levels and may dampen growth, mainly through their impact on the euro area’s terms of trade. Considering longer horizons, concerns also remain with regard to the persistence of global imbalances.
Turning to price developments, when assessing risks to price stability at the current juncture it is essential to distinguish between short-term developments and the medium-term trend. Over the short term, oil prices continue to exert upward pressure on the general price level. According to Eurostat’s flash estimate, annual HICP inflation was 2.4% in June, following 2.5% in May.