Eurozone Inflation Unexpectedly Rises to 2.6% in July, Driven by Energy Costs

The Eurozone’s annual inflation rate unexpectedly rose to 2.6% in July 2024, up from 2.5% in June, according to Eurostat’s flash estimate. This increase was primarily driven by rising energy costs, which accelerated to 1.3% from 0.2% in June. The services sector remained the highest contributor to inflation at 4.0%, slightly down from 4.1% in June, while food, alcohol, and tobacco prices rose by 2.3%.Core inflation, which excludes volatile items such as energy, food, alcohol, and tobacco, remained stable at 2.9% for the third consecutive month. This stability in core inflation is a key indicator for the European Central Bank (ECB) in its monetary policy decisions.The unexpected rise in inflation has sparked discussions about the ECB’s next moves. ECB President Christine Lagarde stated that the decision on interest rates in September is ‘wide open’ and will depend on incoming data. While the ECB aims to keep inflation below 2.0%, Lagarde noted that ‘internal inflationary pressures are still intense’.Inflation rates varied significantly across the Eurozone. Belgium recorded the highest rate at 5.5%, while Finland had the lowest at 0.6%. Germany and France both reported inflation rates of 2.6%, aligning with the Eurozone average.Analysts are divided on whether this data is sufficient for the ECB to declare victory over inflation. While the overall trend of decreasing inflation is expected to continue, the unexpected rise in July suggests that the ECB’s battle against inflation may not be over yet.

Key points

• Eurozone inflation unexpectedly rose to 2.

6% in July 2024, up from 2.

5% in June.

• The increase was primarily driven by rising energy costs, which accelerated to 1.

3% from 0.

2% in June.

• Core inflation remained stable at 2.

9% for the third consecutive month.

• ECB President Christine Lagarde stated that the September interest rate decision is ‘wide open’.

Contradictions👾While some sources reported that the services sector inflation decreased slightly to 4.

0% from 4.

1% in June, others stated it remained at 4.

0%, indicating a minor discrepancy in reporting.