Eurozone inflation smashes historic high

Consumer prices rose by 8.9%, the highest ever recorded
Eurozone inflation smashes historic high

Inflation in the Eurozone hit the highest level on record in July, reaching 8.9%, preliminary data from the European Union Statistics Office (Eurostat) showed on Friday.

The result is worse than the expected consumer price growth of 8.6% and was far above the European Central Bank’s 2% target.

The index rose 0.3% month on month after rising 0.8% a month earlier.

Analysts mostly attribute soaring inflation to higher energy prices, which rose 39.7% year on year this month, after jumping 42% in June. However, analysts state that processed food and service prices have also surged, which may mean that inflation is becoming more widespread.

Food, alcohol, and tobacco prices soared 9.8%, while manufactured goods rose 4.5%. Growth in the cost of services accelerated to 3.7% from 3.4% in June. Prices excluding food and energy rose 4% year-on-year from 3.7% in the previous month.

In order to rein in the prices, the ECB raised the key rate by 50 basis points earlier this month, its first rate hike in 11 years, and vowed further such interventions in the months to come despite the risk of the economy plunging into recession.

Reuters experts predict a 35-basis-point rate hike in September and a combined 90-basis-points hike by the end of the year. The ECB is next scheduled to meet on September 8.

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