In Germany, inflation fell below two percent in August. What is the situation in the eurozone?
Inflation in the eurozone weakened noticeably in August, reaching its lowest level in three years. Consumer prices rose by 2.2 percent compared to the same month last year, the statistics office Eurostat announced on Friday in Luxembourg based on an initial estimate. The last time the inflation rate was this low was in summer 2021.
The significant drop in inflation can be explained by the development of energy prices, which fell significantly year-on-year in August. Eurostat reported a decline of 3.0 percent, while prices for food, beverages and services rose.
Analysts had expected the significant decline in inflation on average. After inflation had weakened over the past year, and in some cases significantly, inflation has proved to be stubborn in recent months. In July it even rose slightly to 2.6 percent.
Core inflation, excluding volatile prices for energy, food and beverages, also fell in August, but only slightly by 0.1 percentage points to 2.8 percent. Core inflation reflects the underlying inflation rate and, in the opinion of many economists, represents the inflation trend better than the headline rate.
The inflation rate for the eurozone has thus come closer to the European Central Bank’s (ECB) medium-term target of two percent. In June, the ECB cut interest rates for the first time since the major wave of inflation. At the interest rate meeting in July, the monetary authorities kept key interest rates stable and made it clear that future interest rate steps depend on the development of economic data. The financial markets are firmly expecting another interest rate cut by the ECB in September.
Source: Stern
