Prices are rising are the fastest pace on record in the eurozone, figures published today revealed.
Inflation surged to 8.9 per cent, up from 8.6 per cent in June, the highest rate since the creation of the euro in 1999.
The fresh figures dial up pressure on the European Central Bank (ECB) to hoist interest rates steeply again to cool price rises.
Last week, the ECB marked its first rate rise in over a decade with a shock 50 basis point move.
Rates are still stimulative at 0 per cent. They had been in negative territory since 2014.
“Another ugly inflation reading for July. Both supply-side problems causing high inflation and the second-round effects resulting from this show no imminent sign of relief,” Bert Colijn, senior eurozone economist at ING, said.
“Ultimately, this makes the impact of the ECB’s rate hike on current inflation very limited, although it does add to a further cooling of demand in the eurozone. With a recession looming and inflation reaching new highs, the question is how the ECB will respond to an economy which is already cooling down. Don’t rule out the ECB front-loading hikes, so 50 basis points in September is definitely still on the table,” he added.
The Bank of England is expected next Thursday to hike rates 50 basis points, which would be the steepest move since it was made independent 25 years ago.
Prices are up 9.4 per cent in the U.K., the quickest acceleration since 1982.