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Inflation in the Eurozone is still persistent and stood at 5.3% during August compared to a year earlier, defying expert forecasts and suggesting inflationary pressures could linger longer, the agency’s data showed. statistics of the European Union.
In August, inflation in the euro zone remained stable, opening a mixed outlook that complicates the forthcoming decision by the European Central Bank on the possibility of pausing rate hikes, after 13 consecutive months.
Headline inflation was 5.3% annually in August, despite experts’ forecasts of 5.1%. Statistical data showed that the core measure, which excludes energy and food prices, declined as expected to 5.3% from 5.5% in July.
Now part of the concern for European bankers is that growth is fading fast and that the economy of the 20 countries that share the euro has stagnated for the past three quarters, creating a greater risk of recession.
Processed food inflation fell to 10.4% from 11.3%. Energy prices fell 3.3% after a 6.1% drop a month earlier. But policymakers are likely to argue a tight job market.
The recovery of jobs after the pandemic still shows challenges for companies, which has led many to retain labor. In addition, they have the financial resources to pay their salaries, since during inflation prices increased significantly more than costs, generating juicy margins.
But this scenario would only serve to maintain a relatively high pace of wage growth. Inflation is not expected to return to the 2% target until the end of 2025.
The decision of the European Central Bank will be known on September 14 and the markets are still divided on the bets. The odds appear to be leaning toward a pause and one final hike later in the year, before cuts are implemented from mid-2024.
with Reuters
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