Inflation in the euro zone came in higher than analysts had expected for the month of August, although it was unchanged from the previous month, complicating the role of the region’s central bank.
Headline inflation was at 5.3% for August, according to preliminary data by the European statistics office Thursday. That’s above the 5.1% expected, according to a poll by Dow Jones, but unchanged from July.
Food prices continued to be the biggest driver for headline inflation, however they came down by 1 percentage point from the previous month.
Core inflation, which strips off volatile items and is a key metric for the European Central Bank, fell over the same period by 0.2 percentage point and it is now at the same level as headline inflation — at 5.3%.
European Central Bank Governing Council member Robert Holzmann said the data shows inflation is still persistent, according to Reuters. He, one of the more hawkish members of the ECB, added that the latest figures pose a “conundrum” for the central bank.
The ECB is due to meet on Sept. 14 and announce whether it is raising rates further. Since July 2022, the central bank has lifted rates by 4.25 percentage points. At its last policy meeting, ECB President Christine Lagarde said that incoming data would guide the bank to either increase rates again or potentially pause.
Pressed by the media at the time, Lagarde went further by saying, “We are not going to cut.”
Despite recent declines, the resilience of high prices raises questions about whether the bank should consider further rate hikes in the ongoing bid to bring inflation down to the 2% target.
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