Euro Area: Inflation rises to new series high in August amid faster price increases for food and services

Euro Area Inflation August 2022

Euro Area: Inflation rises to new series high in August amid faster price increases for food and services

Harmonized inflation jumped to 9.1% in August from July’s 8.9% reading, moving further above the European Central Bank’s target rate of 2.0% and marking the highest print in the series. August’s result was due to faster increases in the prices of food, alcohol and tobacco, non-energy industrial goods and services. On the other hand, prices for energy increased at a slower pace.

On a monthly basis, harmonized consumer prices rose 0.5% in August, above July’s 0.1%. The annual rate of core inflation, which excludes volatile energy and unprocessed foods prices, rose to 5.5% in August from July’s 5.1%—also marking the highest print since records began.

Commenting on the implications for the ECB’s monetary policy stance, Bert Colijn, senior economist at ING, noted:

“As the economy is slowing rapidly – and perhaps already contracting at this point – the question is how much the ECB needs to slam the brakes. Another hike of at least 50 basis points in September seems to be a done deal, with the hawks pushing for 75bp. The big question is how the ECB will respond after this, if indeed signs of economic distress become more apparent, and inflation remains highly driven by supply-side factors.”

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