FRANKFURT
\nEurozone inflation rose to another record high in July and its peak could still be months away, keeping pressure on the European Central Bank to opt for another big interest rate increase in September, according to Reuters.
\nConsumer price growth in the 19 countries sharing the euro currency accelerated to 8.9 percent in July from 8.6 percent a month earlier, far above expectations for 8.6 percent and well clear of the ECB\u2019s 2 percent target, data from Eurostat, the EU\u2019s statistics agency, showed on Friday. Inflation was initially driven by post-pandemic supply bottlenecks but more recently the fall-out of Russia\u2019s war in Ukraine has been the main culprit as it has pushed up energy, metals and food prices. While high energy prices remain a major inflationary factor, processed food and services prices have also surged, suggesting that inflation is becoming increasingly broad.
\nFearing that price growth is spiralling out of control, the ECB raised rates by 50 basis points this month, breaking its own guidance for a smaller move, and promised further rate hikes to prevent the onset of a hard-to-break wage-price spiral.
\nBut inflation is also a dilemma for the bank. Sky high food and energy costs deplete savings and ultimately slow growth, possibly pushing the bloc into recession, in the worst case. Indeed, Germany, the euro zone\u2019s biggest economy, stagnated in the second quarter before what could be a difficult third quarter. The US economy meanwhile unexpectedly contracted in the second quarter.
\nStill, the ECB has made clear that inflation fears trump growth concerns, suggesting that policymakers are willing to lift rates even if that hurts growth, as inflation is now at risk of getting embedded.
\nIndeed, underlying inflation, which strips out volatile food and fuel prices, accelerated to 5.0 percent from 4.6 percent, more than twice the ECB\u2019s 2 percent target. <\/p>\n","protected":false},"excerpt":{"rendered":"
FRANKFURT Eurozone inflation rose to another record high in July and its peak could still be months away, keeping pressure on the European Central Bank to opt for another big interest rate increase in September, according to Reuters. Consumer price growth in the 19 countries sharing the euro currency accelerated to 8.9 percent in July […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-274651","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n