Eurozone CPI Drops To 5.3%, Less Chance of ECB Rate Hike
The latest CPI reading from the Eurozone has shown a decrease in the price pressure. In fact, it wouldn't be wrong to say that inflation has reached a peak point in the Eurozone and is now en route to a downtrend.
This development will allow the ECB to take a deep breath and slow down its recent campaign of the rate hike. Within a few years, the ECB moved from negative rates to high-interest rates that were unseen in the last 20 years. The core reason behind the lifting of the interest rates was to ease historical inflation.
Eurozone CPI For July Is 5.3%
In July, the recorded CPI was 5.3% in the Eurozone, which is lower than the 5.5% CPI reading of June. So overall, the decline in inflation, which started in the autumn, continues even in the summer season.
If we look at the inflation without the energy & food products, it remained pretty much flat near the 5.5%. Considering the recent conditions of the energy market, it is not much of a surprise.
However, the services inflation was an outlier as it jumped from 5.4% to 5.6%. This jump has also increased worries since the cost of the service is directly tied to the wages in the Eurozone.
According to experts, the recent decline in inflation is still not enough to clear the ECB's dilemma about whether to introduce a rate hike or keep the rates steady. That's why the chances of a September rate hike are still on the cards.
If we look around, the labor market is still tight while the inflation is still above the ECB's target. So based on these figures, we can conclude that the wage pressure is here to stay for some time.
That's why we can safely say that inflation will remain above the 2% (ECB target) for the next few years. At the same time, the rate will also remain high in an attempt to counter the CPI.