Eurozone inflation modest decrease in August could stifle further interest rate hikes

LONDON (ICIS)–Eurozone inflation edged down in
August, according to the latest data from the
EU’s statistics agency Eurostat on Tuesday.

Annual inflation declined to 5.2%, modestly
down from the 5.3% level recorded in
July, but significantly lower than the 9.1%
rate recorded a year prior.

This trend was reflected in the wider EU, with
the 27-country bloc tracking 5.9% inflation in
August, down from 6.1% the previous month and
10.1% in August 2022.

Inflation remains higher than the European
Central Bank (ECB) target of 2%, but is
softening which could allay concerns over
interest rate hikes in the near term.

Services accounted
for the highest contribution to inflation in
the eurozone, up 2.41 percentage points (pp),
followed by a 1.98 pp increase from the food,
alcohol and tobacco segment.

Non-energy industrial goods tracked a 1.19 pp
gain in August, while energy was the only
market to track a decline, falling 0.34 pp
compared to the previous year.

Energy is not expected to remain on this
trajectory, according to analysts at Oxford
Economics, as prices have started to rise for
the sector, and demand will increase heading
into winter.

“Despite elevated volatility in food and energy
inflation, we see core inflation coming down
and concerns about growth supporting our view
that we have seen the last rate hike by the
ECB,” said Oxford Economics.

“Should the weaker growth outlook materialise
in new data releases, the ECB may be forced to
update their economic assessment which leads us
to expect rate cuts starting in April next

Front page image shows the skyline of
Stuttgart, Germany (image credit:

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