BRUSSELS (AFP) – Eurozone inflation fell to its lowest level in more than three years this month thanks to falling energy costs, official data showed yesterday, raising expectations of a European Central Bank (ECB) interest-rate cut.
Consumer price rises slowed to 2.2 per cent in August compared to the same month last year after reaching 2.6 per cent in July, closing in on the ECB’s two per cent target.
The August inflation rate was the lowest since July 2021 and in line with expectations by analysts for FactSet and Bloomberg.
But core inflation, which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the bank, cooled slightly to 2.8 per cent in August from 2.9 per cent in July, Eurostat said.
Energy prices in the 20-country single currency area fell by 3.0 per cent in August, after a rise of 1.2 per cent in July, according to the European Union’s (EU) statistics agency.
Food and drinks prices rose by 2.4 per cent this month in the eurozone, at a slightly faster rate than the 2.3 per cent registered in July.
The data will provide some relief after inflation unexpectedly edged up in July.
The ECB launched an aggressive rate-hiking campaign in July 2022 to tame red-hot inflation, which peaked at 10.6 per cent in October that year as the situation in Ukraine sent food and energy prices soaring.
The ECB cut rates for the first time in June this year.
The Frankfurt-based institution has since kept rates unchanged but the market hopes another cut will come after a monetary policy meeting on September 12.
An ECB board member warned yesterday before the data was published that there should be a cautious approach to loosening monetary policy.
“Policy should proceed gradually and cautiously,” Isabel Schnabel said.
“The pace of policy easing cannot be mechanical. It needs to rest on data and analysis,” she said during a speech in the Estonian capital Tallinn.
There were also welcome slowdowns in the inflation rate in Europe’s two biggest economies.
Germany registered an annual rate of inflation of 2.0 per cent in August, down from 2.6 per cent in July, Eurostat said.
Meanwhile, consumer prices in France reached 2.2 per cent this month, down from 2.7 per cent in July.
Across the eurozone, Lithuania recorded the lowest inflation rate in August, at 0.7 per cent, Eurostat data showed. Latvia came second, registering 0.9 per cent inflation this month.
But Belgium still recorded the highest rate of 4.5 per cent in August.
Other Eurostat data published yesterday showed the unemployment rate in the single currency area fell slightly to 6.4 per cent in July from 6.5 per cent in June.
