Inflation in the countries that use the euro continues to moderate, but is still well above the European Central Bank’s inflation target of two percent. At the same time, core inflation ended somewhat higher than expected.
The prices of food, alcohol and tobacco have been the major driver behind price growth in the eurozone. Photo from a food market in Rome, Italy. Photo: MAX ROSSI / Reuters / NTBPublished:
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Price growth in the eurozone (the countries that use the euro) moderated to 5.3 per cent in July, compared to the same month last year. This is shown by recent figures from the EU’s statistics agency.
At the same time, core inflation ended at 5.5 per cent in July.
– The numbers today will not be very decisive, they are a little more status quostatus quoState that something is in, unchanged position or condition. Source: SNLsays senior economist Kyrre Aamdal at DNB Markets.
Senior economist Kyrre Aamdal at DNB Markets. Photo: Cicilie S. Andersen
Inflation figures landed as expected. In advance, a price increase of 5.3 per cent was expected in July, and a somewhat lower core inflation of 5.4 per cent, according to estimates from Bloomberg.
– The figures reflected the impressions from the European Central Bank (ESB). They imagined that total inflation was on the way down, while core inflation stayed up, says Aamdal and adds:
– There is something that has justified the interest rate increase that cameand if it remains there, we also risk that interest rates will have to rise further.
However, Aamdal does not believe that the core inflation figures alone are enough for the ECB to raise interest rates further in September, and that it must be seen in the context of other figures to come.
In June, inflation in the eurozone moderated to 5.5 per cent, down from 6.1 per cent in May. At the same time, core inflation ended at 5.4 per cent in June, an increase from 5.3 per cent in May.
It was mainly the prices of food, alcohol and tobacco that drove up inflation, with a price increase of 10.8 per cent. At the same time, there is a decrease from 11.6 per cent compared to the previous month.
Energy prices fell by 6.1 per cent in July, after falling 5.6 per cent in June. Prices of non-industrial goods rose 5 per cent in July, while prices in the service sector rose 5.6 per cent.
Among the countries within the eurozone, Belgium had the lowest inflation in July at 1.6 per cent. Slovakia had the highest price increase, which came in at 10.2 percent.
Interest rate meeting in September
The European Central Bank (ESB) has repeatedly raised interest rates in an attempt to cool down the economy and overcome high inflation.
Last week, the ECB raised the key interest rate by 0.25 percentage points to 3.75 percent. Thus, the interest rate is at the highest level since 2001.
Christine Lagarde, governor of the ECB, said on Thursday that the central bank has an open mind to a further interest rate hike in September, and that it will depend on economic figures going forward. The ECB is determined to get inflation down to two percent.
– For the ECB to shrug its shoulders and believe that inflation is on its way down to 2 per cent, we probably need to see that the growth in service prices comes down more clearly, and that may take some time. Here the central bank is being cautious and they want to see how previous interest rate increases will feed through the economy, says Aamdal.
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2023-07-31 09:00:10
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