FRANKFURT, Germany (AP) – Inflation in the 20 countries that use the euro rose to 2.6% in July, still above the European Central Bank’s target to cut interest rates and boost growth as economies struggle. complicating the ECB’s next decision on whether or not. To achieve a satisfactory recovery after a long period of stagnation.
Inflation rose from 2.5% in June, official figures released by the EU’s statistics agency Eurostat on Wednesday showed. Services inflation, a number closely monitored by the ECB, continued to rise at 4.0%, down from 4.1%.
The rise will intensify debate over the ECB’s next action at its September 12 Governing Council meeting. The central banks of euro zone countries implemented their first interim rate cut in June, cutting the benchmark interest rate by a quarter of a percentage point to 3.75%. The ECB’s Governing Council then suspended its July meeting, and ECB President Christine Lagarde said the central bank would make decisions at each meeting based on future data on inflation and economic performance.
The ECB, along with other central banks including the US Federal Reserve, has rapidly raised interest rates to counter a spike in inflation caused by Russia’s invasion of Ukraine, soaring energy prices, and the economy’s sudden recovery after the pandemic. I did it. parts, raw materials, etc. Europe was particularly hit by a spike in energy prices after Russia cut off most of its natural gas supplies.
Energy prices have fallen and inflation is now down from its peak of 10.6% in October 2022. But inflation has spread to wages and the price of services in a wide range of categories, including health care, theater tickets, restaurant meals, hotel rooms and hair salons. ‘price. As a result, overall inflation remains between 2% and 3%, falling short of the ECB’s 2% target, which is considered best for the economy.
The ECB is expected to announce its inflation rate again in August and digest it before its next Governing Council meeting. Bankers said they expect inflation to hover around current levels for the rest of the year and decline to reach the target by the end of 2025.
U.S. Federal Reserve officials are considering the timing of their first interest rate cut from their current high-level benchmark range of 5.25% to 5.5%, and will use their meeting ending Wednesday to raise interest rates in September. It has the potential to set trends. The US annual inflation rate in June was 3.0%.
Raising interest rates combats inflation by raising the cost of credit to buy things, cooling demand for goods, and taking pressure off prices. However, rising interest rates could have a negative impact on growth, with recent economic data as Europe struggles to show a convincing recovery after more than a year of near-zero growth rates. is in decline.
Gross domestic product (GDP) increased by 0.3% in each of the first two quarters of this year, an improvement from five consecutive quarters of near zero or less. But recent indicators of future economic activity, such as the S&P Global Purchasing Managers Index, suggest the economy is still barely growing. One source of power is the labor market. Unemployment rate remains low at 6.4%
