Annual inflation in the eurozone accelerated to a record 8.9%

Annual inflation in 19 countries of the Eurozone in July accelerated to 8.9% after 8.6% a month earlier, updating the historical record, informed Eurostat, confirming its preliminary estimate published at the end of last month.

In July 2021, the annual inflation rate was 2.2%. The growth of consumer prices in the European Union in annual terms also accelerated to 9.8% after 9.6% in June.

The highest annual inflation rates were recorded in Estonia (23.2%), Latvia (21.3%) and Lithuania (20.9%), the lowest – in France and Malta (6.8%), as well as in Finland (8% ).

Also, higher energy prices (+39.6% year-on-year after rising 42% in June and 37.5% in May), as well as higher prices for food, alcohol and tobacco products (growth in was 9.8% compared to 8.9% in June). Industrial goods rose in price by 4.5% (after 4.3% in June), and services – by 3.7% (after 3.4% in June).

At the same time, as before wrote Vedomosti, EU GDP has not yet gone into negative territory despite the acceleration in consumer prices. The European economy is growing for the second quarter in a row. In the first three months of 2022, the growth in annual terms was 0.5%, and in the II quarter – 0.7% (relative to the previous quarter), follows from the report of the EU statistics office, published on July 29. Experts expect that the situation for the European economy will develop according to an unfavorable scenario.

How wrote Reuters, data from Eurostat is well above analysts’ forecast of 8.6% and the European Central Bank’s (ECB) target of 2%. As the agency noted at the time, inflation in the Eurozone is still the most affected by the consequences of Russia’s special operation in Ukraine.

In order to bring inflation back to target, on 21 July the ECB He has made a decision to raise the key rate by 50 basis points at once – up to 0.5%, the increase with such a step occurred for the first time since 2011. The regulator added that at the next meetings of the Board of Governors “further normalization of interest rates will be appropriate.”

The ECB also introduced a new anti-crisis mechanism designed to limit fragmentation in the region, that is, to reduce discrepancies in the cost of borrowing for different eurozone states. According to ECB President Christine Lagarde, the mechanism will allow the regulator to raise interest rates “as needed” and help stabilize inflation.

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