A sort ofAlso Eurozone Overall, the cost of living has increased. As Eurostat announced on Tuesday after preliminary estimates, consumer prices rose by 3% in August. The inflation rate in July was 2.2%.
From the perspective of the main components of inflation in the Eurozone, it is expected that “energy” will have the highest annualized rate in August (15.4% vs. 14.3% in July), followed by “non-energy industrial products” (2.7% vs. 0%). 7 7% of the month), “Food, Alcohol, and Tobacco” (2.0 vs. 1.6% in July) and “Services” (1.1 vs. 0.9% in July).
Germany reported on Monday that inflation rose further, from 3.8% in July to 3.9% in August, compared with 2.3% in June. In addition to energy, food and services, such as restaurants and hotels, have also become more expensive.
France’s inflation rate is also rising
Other countries in the euro area are now also reporting rising inflation, including France and Spain. The inflation rate there has climbed from 1.5% to 2.4%. After all, this is the highest value since October 2018. No country in the euro zone has negative inflation, that is, prices have fallen on average, just as it was a few months ago. Estonia’s current inflation rate is 5%.
this European Central Bank It is believed that the increase in inflation is temporary and due to various special effects related to the pandemic. After the July Management Committee meeting, European Central Bank President Christine Lagarde stated that the central bank will maintain an expansionary policy until the inflation rate not only reaches 2%, but also stays near 2% in the medium term. The European Central Bank believes that this situation will not be realized in the long term.
Indeed, the inflation rate in the Eurozone was near its target as early as June, at 1.9%.However, considering Lagarde The recent increase in the inflation rate is mainly a temporary phenomenon, which can be explained by the effects of rising energy prices and a temporary increase in German value-added tax. Even if the inflation rate may continue to rise until the end of the year, it may fall in the first few months of the coming year.
Rate hike as soon as 2025
Investment bank Goldman Sachs now believes that the European Central Bank will not raise its key interest rate until 2025 at the earliest. At least for the foreseeable future, it may slow the pace of bond purchases. Goldman Sachs Chief Economist Jari Stehn said: “We expect the European Central Bank to slow down its bond purchases under the PEPP crisis plan in the fourth quarter of this year.” By then, the European Central Bank will only purchase 65 billion euros of bonds every month in the crisis plan. Another 80 billion euros.
“This will be a signal that monetary policy is slowly exiting the crisis mode,” Stehn said: “But the central bank’s actions after the PEPP crisis plan expires will be more decisive.” He believes that the central bank is unlikely to end next year in March if the crisis When the plan expires, no further measures will be taken, and only 20 billion euros of bonds will be purchased every month after the long-term purchase of the plan APP.
“In my opinion, there will be a transitional arrangement,” Stehn said: “The ECB will either temporarily increase APP’s monthly bond purchases, or launch a new plan for the transition period — or slightly extend the crisis plan.” Most likely. The last possibility: “It can be said that PEPP gradually decreases slowly.”
