The consumer price index in the eurozone did not slow in August with average annual inflation in the 20 eurozone countries remaining at 5.3%, well below the European Central Bank’s target of 2%.
Core inflation, excluding food and energy, eased to 5.3% (from 5.5% in the previous month). Food, alcohol and tobacco recorded the highest increase in prices in August (9.8% compared with 10.8% in July), followed by services (5.5% compared with 5.6% in July), non-energy industrial goods (4.8% compared with 5.0% in July) and energy (-3.3% compared with -6.1% in July). The figures for services also recorded a small drop, from 5.6 to 5.5%.
The highest inflation rates in August were recorded in Slovakia (9.6%), Croatia (8.5%) and Austria (7.6%).
The lowest percentages were recorded in Spain and Belgium (2.4%) and Cyprus (3%), followed by Greece at 3.4% (from 3.5% in July).
Inflation data is a key factor that will influence the ECB’s decision on whether to raise interest rates again at its next meeting on September 14. The ECB is trying to counter inflationary pressure with strong interest rate hikes, as it has raised its key interest rate by a total of 4.25 percentage points since summer 2022.
Markets, however, do not see likely the possibility of a rate hike ahead of the next meeting, following the morning speech by Isabel Schnabel, a member of the ECB’s executive committee, who did not rule out a pause in increases.
Meanwhile, market representatives stressed to “Naftemporiki” that inflation is very likely to ease in September, as most evidence suggests that price pressures are easing. The labor market remains stable, with the average eurozone unemployment rate unchanged at a record low of 6.4%.
At the same time, however, the ‘debt bomb’ is hitting Europe. Borrowing costs have risen, putting companies, consumers and governments at risk.
These developments are also a blow to the industrial strategy that the European Union has been trying to draw since the beginning of the year, under the pressure of tough American competition, triggered by the Inflation Reduction Act (IRA).