Christine Lagarde, President of the European Central Bank (ECB), delivered a speech at an ECB press conference in July.
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August witnessed higher-than-expected inflation in the euro zone, presenting a challenge for the region’s central bank.
Preliminary data from the European statistics office on Thursday revealed headline inflation of 5.3% for August, matching the forecasts of economists from Dow Jones but surpassing the expected 5.1% figure. However, this rate remained unchanged from July.
While food prices contributed significantly to headline inflation, they did experience a 1 percentage point decrease compared to the previous month.
Core inflation, which excludes volatile items and holds importance for the European Central Bank, also decreased by 0.2 percentage points during the same period. It now stands at 5.3%, aligning with headline inflation.
According to Reuters, European Central Bank Member Robert Holzmann acknowledged that the data indicates persistent inflation, presenting a “conundrum” for the central bank. Holzmann, known for his more hawkish stance, expressed this view.
The central bank’s upcoming meeting on September 14 will determine whether further rate increases will occur. Since July 2022, the ECB has raised rates by 4.25 percentage points. In the last policy meeting, ECB President Christine Lagarde stated that forthcoming data would guide the bank’s decision to either continue increasing rates or potentially pause.
When pressed by the media at the time, Lagarde made it clear, saying, “We are not going to cut.”
Despite recent declines, the persistence of high prices raises questions about whether the bank should consider additional rate hikes in its ongoing pursuit to bring inflation down to the targeted 2% mark.
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