Inflation rate in the euro zone at 1.0 percent – Expectations for the ECB rise

The rise in consumer prices in the euro zone did not gain any momentum in August either. According to Eurostat’s flash estimate, the annual rate of inflation in the currency area remained unchanged at 1.0 percent as in the previous month. However, this means that the inflation rate remains well below the ECB’s original target. Once again, energy commodities, which fell in price year-on-year, played a major role in the weak price trend. No wonder, since one of the main fundamental drivers of energy prices in the shopping basket of European consumers, the price of crude oil, is quoted around 19 percent lower than a year ago.
At the country level, the national economies, which have also provided initial estimates of price trends, showed only limited momentum. In Germany, the Harmonized Index of Consumer Prices (HICP) fell from 1.1 to 1.0 percent, in France it fell from 1.3 to 1.2 percent. Spanish consumer prices rose by only 0.4 percent year-on-year, compared with 0.6 percent in the previous month. In Italy alone, the annual rate rose slightly from 0.3 to 0.5 percent. To the extent that details are already available, the country details correspond to the euro aggregate: lower prices for energy and otherwise hardly any price accelerations.
Against the backdrop of the economic slowdown, domestic price pressure remains only moderate. External influences, such as the price of crude oil, are currently putting the brakes on consumer price development. On the one hand, this is good news for consumers; on the other hand, the financial markets are likely to see the low inflation rate in the euro zone as only further confirmation of an expansion of the ECB’s expansionary measures. And expectations for the next ECB meeting on September 12 are already very high in this respect. However, it is questionable whether this will lead to a higher inflation rate. Even the last measures were unable to give consumer prices a lasting boost. And ultimately the ECB cannot influence the price of crude oil either, low interest rates or not.

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