People shop at Lafayette Market in downtown Toulon on July 27, 2024.
Magali Cohen/Hans Lucas | AFP | Getty Images
The European Union’s statistics agency said on Wednesday that the euro zone’s overall inflation rate unexpectedly rose to 2.6% in July., Although price growth in the services sector slowed slightly.
The inflation rate in June was 2.5%, down slightly from 2.6% in May. Economists polled by Reuters had expected July’s overall figure to be unchanged from June’s 2.5% reading.
Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, hit 2.9% in July, compared with a Reuters forecast of 2.8%. This compares to June’s core reading of 2.9%.
The widely watched services industry inflation rate in July was 4%, down from 4.1% in June.
Unified inflation rates edged higher in several major euro zone countries, including major economies Germany and France. The inflation rate in both countries was 2.5% in June and rose to 2.6% in July.
The inflation rate was released a day after data for the region Second quarter gross domestic product, Eurostat said it rose 0.3% in the three months to the end of June.
That was higher than the 0.2% growth expected by economists polled by Reuters, even though Germany, the euro zone’s largest economy, reported a 0.1% contraction.
Investors will now weigh how the new data will affect the trajectory of possible future interest rate cuts from the European Central Bank. this ECB keeps interest rates steady The meeting was held earlier this month after spending cuts were made in June. At the time, it left open the option of another rate cut in September.
The Governing Council of the European Central Bank stated that it will continue to consider the dynamics and prospects of inflation, as well as the strength of monetary policy transmission, in its decision-making. It emphasized that this was “not a pre-commitment to a specific interest rate path”.
Julien Lafargue, chief market strategist at Barclays Private Bank, said on Wednesday that the latest inflation data was unlikely to have a significant impact on the outlook for interest rates.
“While higher-than-expected headline inflation may be seen as a setback for the ECB, we don’t think it necessarily changes the narrative. The fact that economic growth remains weak – including in Q2 GDP data – should help Inflation remains on a downward trend,” he said.
Lafargue pointed out that the European Central Bank may still cut interest rates in September.
