2024-07-31 18:21:19
People shop at Cour Lafayette, a market in downtown Toulon, July 27, 2024.
Magali Cohen / Hans Lucas | AFP | Getty Images
Eurozone headline inflation unexpectedly rose to 2.6% in July, Eurostat said on Wednesday., Although price increases in the services sector slowed slightly.
Inflation was 2.5% in June, down slightly from 2.6% in May. Economists polled by Reuters had expected inflation to remain unchanged at 2.5% in July.
Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, came in at 2.9 percent in July, compared with a Reuters forecast of 2.8 percent. Core inflation was 2.9 percent in June.
The closely watched services sector inflation rate was 4% in July, down from 4.1% in June.
The coordinated inflation rates of several major eurozone countries have risen slightly, including the major economies of Germany and France, where the inflation rates were 2.5% in June and rose to 2.6% in July.
The inflation rate came a day after the European Union released second-quarter gross domestic product data, which Eurostat said showed growth of 0.3% in the three months to the end of June.
The figure 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 rate cuts from the ECB. The ECB held rates steady at its meeting earlier this month after cutting rates in June. At the time, it left open the option of another rate cut in September.
The ECB’s Governing Council said it would continue to take into account inflation dynamics and the outlook, as well as the strength of monetary policy transmission, in its decision-making process. It stressed that this “does not pre-commit to a specific interest rate path”.
Julien Lafarge, chief market strategist at Barclays Private Bank, said on Wednesday that the latest inflation data was unlikely to have a significant impact on the interest rate outlook.
“While higher-than-expected headline inflation could be seen as a setback for the ECB, we do not think it will necessarily change the status quo. In fact, economic growth remains subdued – including in the second quarter GDP data – which should help inflation remain on a downward trajectory,” he said.
Lafarge pointed out that the ECB may still cut interest rates in September.
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