Source: AFP
Eurozone inflation fell this month to its lowest level in three years thanks to lower energy costs, official data showed on Friday, raising expectations for a rate cut by the European Central Bank.
Consumer price increases slowed to 2.2 percent in August compared with the same month last year, after reaching 2.6 percent in July, nearing the European Central Bank’s 2 percent target.
August’s inflation rate was the lowest since July 2021 and in line with FactSet and Bloomberg analysts’ expectations.
However, core inflation, which strips out volatile energy, food, alcohol and tobacco prices and is a key gauge for the bank, eased slightly to 2.8 percent in August from 2.9 percent in July, the bank said. Eurostat.
Energy prices in the 20-nation single currency area fell 3.0 percent in August, after rising 1.2 percent in July, according to the EU statistics office.
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Food and drink prices rose by 2.4% this month in the eurozone, slightly faster than the 2.3% recorded in July.
Friday’s data will provide some relief after the unexpected rise in inflation in July.
The ECB launched an aggressive rate hike campaign in July 2022 to tame red-hot inflation, which peaked at 10.6% in October of that year as Russia’s invasion of Ukraine sent food and energy prices soaring.
The ECB cut interest rates for the first time in June this year.
The Frankfurt-based institution has since kept rates unchanged, but the market hopes for a further cut after a monetary policy meeting on September 12.
An ECB board member warned on Friday ahead of the data release that a cautious approach to easing monetary policy should be taken.
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“Policy must proceed gradually and carefully,” said Isabel Schnabel.
“The pace of policy easing cannot be mechanical. It must be based on data and analysis,” he said during a speech in the Estonian capital Tallinn.
Falling inflation in France, Germany
There were also welcome slowdowns in the rate of inflation in Europe’s two largest economies.
Germany recorded an annual inflation rate of 2.0% in August, up from 2.6% in July, according to Eurostat.
Meanwhile, consumer prices in France rose 2.2% this month, up from 2.7% in July.
Across the eurozone, Lithuania recorded the lowest inflation rate in August, at 0.7%, according to Eurostat data.
Latvia came in second, posting 0.9% inflation this month.
However, Belgium still recorded the highest rate of 4.5% in August.
Other Eurostat data released on Friday showed that the unemployment rate in the single currency area fell slightly to 6.4% in July from 6.5% in June.
Source: AFP
