The inflation in the eurozone appears to have stabilized around two percent.
An estimate from the EU’s statistics office, Eurostat, shows on Friday that inflation in July landed at exactly two percent.
Also in June, inflation in the countries that use the euro as currency was at two percent.
The European Central Bank (ECB) has a target of keeping inflation at two percent in the medium term. To ensure this, the central bank can adjust interest rates either up or down.
According to Allan Sørensen, who is the chief economist at Dansk Industri, the stable inflation means that the ECB likely has no more interest rate cuts planned for this round.
“The interest rate from the ECB has reached a neutral level. If the rate goes much lower, there is a risk that it will increase inflation again. It is only if growth seriously disappoints that the ECB will lower rates much further,” he writes in a comment.
However, Dansk Industri predicts that there will likely be one more small interest rate cut in the autumn.
After a rate meeting at the end of July, the ECB decided for the first time in a year to keep the interest rate steady. Prior to that, the central bank had cut rates eight times in a row.
Søren Kristensen, who is the chief economist at Sydbank, notes that core inflation has not yet fully reached two percent.
Core inflation, which does not include food and energy prices, landed at 2.3 percent in July according to Eurostat’s estimate. This is the same level as in June.
However, Søren Kristensen expects that there will continue to be a “reasonable and low” inflation in the eurozone. This is partly because the EU has largely chosen not to retaliate against American tariffs.
“This could mean that the trade war ends up resulting in lower prices in the eurozone. These are some of the reasons why we expect there will continue to be a reasonable and low inflation in the eurozone,” writes Søren Kristensen in an analysis.
/ritzau/
