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Euro Zone Inflation Hits 10-Y High ahead of Key CB Meeting

Inflation in the euro zone rose again in August, ahead of a closely-watched European Central Bank meeting in just over a week’s time. Consumer prices increased by 3% this month from a year ago, according to preliminary estimates published Tuesday, after rising by 2.2% in July. If the August figure is confirmed in a few weeks’ time, it would represent the highest inflation reading for 10 years.

This comes after Germany reported on Monday its highest consumer prices since 2008, with a headline inflation rate of 3.4% in August. France also reported its highest inflation rate in nearly three years on Tuesday. “Euro zone households have accumulated substantial excess savings during lockdowns,” Salomon Fiedler economist at Berenberg, said in a note on Tuesday, adding that “should they decide to spend a larger than expected portion on consumption soon, price pressures could rise further in the near term.”

The ECB, due to meet Sept. 9, is expected to discuss the future of its asset purchase program as its governing council seems divided about when to start relaxing stimulus measures. Speaking on Monday, France’s central bank governor, Francois Villeroy de Galhau, said the ECB should take into consideration the recent economic recovery when discussing what to do with its Covid stimulus package.

Source: FXPro

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