The inflation rate in the Eurozone held steady at 5.3% in August, with core inflation also dipping to 5.3% from July’s 5.5%.
The main inflation rate exceeded forecasts, largely influenced by a month-on-month 3.2% surge in energy prices. This has intensified worries that inflation may persist longer than initially thought.
However, the general trend in inflation appears to be cautiously leaning towards disinflation, as changes in the prices of goods and services largely met expectations.
On a country-by-country basis, inflationary pressures were mainly fueled by France and Spain, while price decreases in the Netherlands and Italy helped to balance the overall rate.
Factors like energy prices, specifically noticeable in France’s regulated price increases, contributed to the disparities this month.
Looking forward, it is anticipated a further declines in inflation. In Germany, a substantial reduction is expected next month as the impact of government aid wanes.
Survey data also suggest a significant disinflationary effect on the prices of goods, while service costs are likely to decline more gradually due to increased labor costs. Notably, wage growth continues to exceed levels that would align with a 2% inflation rate.
For the European Central Bank, these inflation statistics for August are crucial data points leading up to the governing council’s meeting in a fortnight.
While inflation levels remain high enough to concern the more hawkish members of the ECB, evidence does suggest that a slowdown in inflation is on the horizon.
″Despite the situation being finely balanced, considering the ECB’s recent approach that underacting is riskier than overacting with regard to rate hikes, we still anticipate a 25 basis point increase in rates,″ according to an article from ING Bank.
Article based on a story from ING Bank as copyright owner
