Euro Area: Inflation declines in August
Harmonized inflation fell to 2.2% in August from July’s 2.6%. August’s figure represented the smallest increase since July 2021 and was in line with market expectations. The decline was driven by a fall in energy prices and softer price pressures for non-energy industrial goods. On the flip side, prices for food and services rose at faster rates in August.
Annual average harmonized inflation fell to 2.7% in August (July: 3.0%). Meanwhile, core inflation edged down to 2.8% in August from July’s 2.9%.
Finally, harmonized consumer prices rose 0.16% in August over the previous month, following the 0.03% drop recorded in July.
Our panelists expect inflation to hover around August’s level in the coming months, remaining slightly above the ECB’s 2.0% target.
ING’s Bert Colijn commented on monetary policy implications:
“For the ECB, the modest progress in core inflation and wages now and expectations for next year seem enough to cut by 25bps in September. But this remains a slow and gradual process of releasing the brakes on the economy as the ECB continues to be concerned about upside risks to the inflation outlook.”