Eurozone inflation rate in August 2024

Euro zone inflation fell to a three-year low of 2.2% in August, preliminary data from the European Union’s statistics office showed on Friday, reinforcing expectations that the European Central Bank will cut interest rates in September.

The figure was down from 2.6% in July and in line with forecasts of economists polled by Reuters.

Core inflation, which excludes volatile components such as energy, food, alcohol and tobacco, fell to 2.8% in August from 2.9% in July, also in line with a Reuters poll.

The euro continued to fall against the pound after the data, falling 0.1% to 0.8408 pounds. The euro rose 0.04% against the dollar to $1.1083 as investors prepared for the Federal Reserve to cut interest rates in September, the first step of monetary easing by the Federal Reserve this cycle.

Earlier, prices rose in Germany, the euro zone’s largest economy. The temperature dropped more than expected, down to 2% On a euro area harmonised basis, retail sales rose 10% in the month.

Economists at ING expect core eurozone inflation to remain above 2.5% for the rest of the year due to the stickiness of goods and services.

The market has fully expected the ECB to cut interest rates by another 25 basis points in September, after the institution announced First rate cut in Juneand plans to cut interest rates by another 25 basis points before the end of the year.

Kyle Chapman, foreign exchange market analyst at Ballinger Group, said that despite this, some details contained in the report still worry ECB policymakers, especially the 4.2% service sector inflation rate.

“The positive news was purely due to energy prices and it masked the fact that there was little real progress on the underlying pressures,” Chapman said in a note.

“Services inflation is now at its highest level since October last year and has been hovering around 4% for nearly a year, having been moving in the wrong direction since the spring.”

Before the latest data was released, Ed Smith, co-chief investment officer at Rathbones Asset Management, told CNBC’s “Squawk Box Europe” on Friday that the ECB will cut interest rates further and noted that ECB President Christine Lagarde is focused on wage inflation.

“Negotiated wages are very important in the euro area, with around 80% of the workforce receiving wage increases through negotiation. Negotiated wages fell sharply across the euro area in the second quarter, and other indicators also fell, such as Indeed.com The list … the ECB’s telephone survey of businesses … also showed a fall in wage intentions.”

“But there is a certain stickiness, the latest (Purchasing Managers Index) data, the services surveys show a certain stickiness in the price component,” he added, noting that this would make some ECB voting members cautious.