Eurozone inflation soared to its highest level in a decade this month to breach the European Central Bank’s target, according to official figures published today.
Data released by Eurostat, Europe’s statistical agency, shows prices rose three per cent this month in the 19 countries that make up the Euro area, ticking up from 2.2 per cent in July.
The increase was primarily driven by rising energy costs and food prices. Prices for industrial goods also rose, caused by severe supply chain disruption creating shortages of inputs, putting upward pressure on factory prices.
The headline three per cent inflation rate is higher than the latest adjusted forecast by the ECB.
However, analysts expect the central bank to retain an ultra-loose monetary policy position, mainly caused by the central bank’s belief that recent price surges are due to one-off transitory factors.
Bert Colijn, senior Eurozone economist at ING, said: “Despite the jump in core inflation and the further rise in headline inflation, this is not set to sway the ECB towards a more hawkish stance ahead of the September meeting next week.”
Policymakers at the ECB argue inflation is likely to run below the central bank’s target in the long run, which is partly used to justify its commitment to maintaining stimulus measures.
“ECB president Christine Lagarde [has] repeatedly mentioned that the ECB would not act on temporary inflation,” Colijn added.
“Today’s release will cause some sweaty palms but has not given much evidence of more structural high inflation.”