Consumer prices in the euro zone rose 5.3 percent in August compared to the same period a year earlier, remaining at the same pace as the previous month, defying economists’ expectations of a slowdown, according to Reuters. Preliminary estimate By the European Union Statistical Agency.
While inflation has slowed significantly from its peak of more than 10% in October last year, there are signs that some inflationary pressures persist, even as the bloc’s economy weakens. Food inflation was again the largest contributor to the headline rate, rising 9.8 percent from the previous year on average across the 20 countries that use the euro.
Inflation also got some upward momentum thanks to a jump in energy costs, which rose 3.2 percent in August compared to the previous month.
Core inflation, which excludes food and energy prices and is used as a measure of domestic price pressures, slowed to 5.3% from 5.5% in July.
By country: Rising energy prices are increasing inflationary pressures in the region’s largest economies.
In some of the eurozone’s largest economies, a recovery in energy prices has offset a slowdown in food price inflation. The annual rate of inflation accelerated to 5.7 percent in France and 2.4 percent in Spain this month.
In Spain, inflation fell below 2 per cent, the European Central Bank’s target, in June, but has since rebounded.
Inflation in Germany, Europe’s largest economy, was 6.4 percent in August, slowing only slightly from the previous month, as household energy and motor fuel costs increased.
What’s next: The European Central Bank is considering another interest rate increase.
The acceleration of inflation in some of the region’s largest economies comes two weeks before the next policy meeting of the European Central Bank. As analysts analyze the data, the question is whether the reports are worrying enough to convince policymakers to raise interest rates again at their meeting in mid-September. The central bank has raised interest rates nine consecutive times, by 4.25 percentage points in the span of about one year, and there is mounting evidence that higher interest rates are constraining the economy, especially as lending declines.
Last month, Christine Lagarde, the head of the central bank, said she and her colleagues had an “open mind” about the decision made in September and subsequent meetings. Policymakers are trying to strike a balance between raising interest rates enough to stem high inflation, while not causing unnecessary economic pain.
“We may rise, we may hold,” she said. What was decided in September is not final; The matter may differ from one meeting to another.”
On Thursday, ahead of the release of Eurozone data, Isabelle Schnabel, a member of the ECB’s Executive Board, said that “fundamental price pressures remain stubbornly high, with domestic factors now becoming the main driver of inflation in the Eurozone.” She added that this meant that a “enough restraint” policy stance was needed to bring inflation back to the bank’s 2 per cent target “in due course”.