[News] Eurozone CPI Edges Up to 2.6%, with Rate Cut Expected in September

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Eurostat released the July CPI data for the Eurozone on August 20, showing an annual growth rate of 2.6%, slightly up by 0.1% from the previous month and in line with market expectations. The three countries with the lowest annual inflation rates were Finland (0.5%), Latvia (0.8%), and Denmark (1.0%), while the highest rates were observed in Romania (5.8%), Belgium (5.4%), and Hungary (4.1%).

Among the components of the overall CPI, services inflation made the largest contribution, with an annual growth rate of 4.0%, slightly down from 4.1% in the previous month, contributing 1.82 percentage points to the overall CPI increase. This was followed by food, alcohol, and tobacco (0.45 percentage points), non-energy goods (0.19 percentage points), and energy (0.12 percentage points).

According to the European Central Bank’s (ECB) third-quarter professional forecasters’ survey, the CPI growth rate is expected to decline to 2.4% by the end of 2024, with long-term inflation projected to return to the ECB’s 2% target. Additionally, the main refinancing rate is expected to decrease to 3.75% in 2024 (currently 4.25%), with the market anticipating that the ECB will implement a 25 basis point rate cut in both September and December, and further reductions to 3.0% and 2.5% in 2025 and 2026, respectively.