Eurozone inflation revised slightly down – but it’s still twice the ECB’s target
Eurozone consumer inflation in August was slightly lower than initially estimated, the European Union’s statistics office Eurostat said on Tuesday, but still remained more than twice the European Central Bank’s target.
Eurostat said inflation in the 20 countries sharing the euro was 0.5 per cent month-on-month in August and 5.2 per cent year-on-year, lower than the flash estimate of 5.3 per cent year-on-year reported on Aug 31.
The ECB wants to keep inflation at 2.0 per cent in the medium term.
Eurostat said core inflation, which excludes volatile prices of energy and unprocessed food, was 0.3 per cent month-on-month in August and 6.2 per cent year-on-year, in line with initial estimates.
An even narrower measure of inflation, which also excludes alcohol and tobacco and is watched by many economists, was 0.3 per cent on the month and 5.3 per cent year-on-year, also in line with the Aug 31 estimates.
Eurostat said more expensive services had the biggest impact on the year-on-year reading in August, adding 2.41 percentage points to the final number. Food, alcohol and tobacco added another 1.98 percentage points and industrial goods 1.19 points. A fall in the prices of energy subtracted 0.34 points.
To bring inflation down to its target, the ECB raised its deposit rate to a record high 4 per cent last week and hinted at a pause, raising expectations in the market that its next move will be a cut, possibly as soon as late spring 2024.
Slovak ECB policymaker Peter Kazimir said on Monday that the rate hike on Thursday may have been its last for now, but policymakers will need until March to be sure, with further rate hikes not yet ruled out.
This comes amid a big week for central banks, with Andrew Bailey and Co. set to make a decision on the Bank of England’s interest rate on Thursday.
It’s been touted that the Monetary Policy Committee will raise it for the 15th consecutive time, or keep it as it is; in its continued battle with sticky inflation. On Monday, former Prime Minister Liz Truss called for the Bank’s independence to be reviewed over its failure to tackle inflation.
Reuters – Jan Strupczewski