Inflation in the euro area rises surprisingly
Inflation in the Eurozone surprisingly accelerates. Consumer prices in the 20-member bloc rose 2.6 percent year-on-year in July, Eurostat said in a preliminary estimate on Wednesday, surpassing economists' expectations of a 2.5 percent increase.
Economists polled by Reuters had expected a rate in line with June's figure. The European Central Bank (ECB), which targets an inflation rate of 2.0 percent, may now find its goal further out of reach. In addition to a more pronounced increase in energy prices, central bankers may also be concerned that the slowdown in price increases in the services sector was minimal.
In early June, the ECB cut interest rates for the first time since 2019, lowering the key deposit rate to 3.75 percent from 4.00 percent. However, it held off on further cuts in July. ECB President Christine Lagarde left the door open for the September meeting, when new economic projections from the ECB's economists will also be available.
Core inflation, which excludes volatile prices for energy, food, alcohol, and tobacco, remained unchanged at 2.9 percent in July. The ECB closely watches this measure as it provides a better picture of underlying price trends. Prices for services, which the ECB also keeps a close eye on, rose 4.0 percent, down slightly from June's 4.1 percent.
The unexpected acceleration in inflation within the euro area might lead the European Central Bank to find its inflation target harder to achieve. Despite the rise in energy prices and the minimal deceleration in the price increases in the services sector, the ECB did not lower interest rates further in July.
