The ECB reported that core inflation in the Eurozone has most likely reached its peak, although its exact level remains difficult to determine. This information comes from a preview of the ECB’s economic bulletin, which will be published on 10 August.
The recent easing stems mainly from non-energy industrial goods, the ECB said, adding that prices of services also appear to have started to decline. At the same time, domestic price pressures are becoming increasingly evident, as underlined by the Governing Council last week.
Monetary policy makers raised interest rates for the ninth time to 3.75% (deposit rate), and said inflation is set to stay too high for too long. President Christine Lagarde has promised a deeper analysis of the underlying trends in September, when a further hike or pause will be decreed, based on the data.
Outgoing Governing Council member Fabio Panetta said underlying inflationary pressures are moderating but offered a different analysis, suggesting that core price growth is a lagging indicator, not a leading one.
“Today’s core inflation growth doesn’t tell us much about where core inflation will settle over the medium term,” Panetta said. “Just as higher energy prices have permeated the economy, they will eventually come down as well.”