August inflation in the euro area reached a record high of 9.1 percent on an annual basis, as high energy prices were the main driving force, adding to pressures on the European Central Bank (ECB), which will soon raise interest rates.
The inflation rate was higher than expectations, as a Reuters poll of economists had forecasted a 9 percent rate. It is the ninth consecutive record of consumer price increases in the region, with the rise beginning in November 2021. The headline inflation rate in the Eurozone was 8.9 percent (on an annual basis) in July.
These figures are the highest in the history of inflation levels recorded by the European Commission for Statistics (Eurostat) since January 1997.
With the exacerbation of inflation rates, the ECB will have to be more aggressive in raising interest rates at its meeting on the eighth of September.
In this context, Goldman Sachs expected the ECB to raise interest rates by 75 basis points at its next meeting. “Given the stronger-than-expected inflation data released today – as well as hawkish comments and higher risks to growth in the short term – we now expect the (ECB) Executive Board to raise interest rates by 75 basis points at its September meeting,” it said in a note today.
On Wednesday, German Central Bank Governor Joachim Nagel demanded that “the European Central Bank’s board of governors act by taking decisive action at its next meeting,” noting that inflation is well above the 2 percent target set by the ECB.
“We need a significant increase in interest rates in September. More increases should be expected in the coming months,” he was quoted by the French Press Agency as saying. “Superinflation is becoming a huge burden on an increasing number of people. Families who have basically little money to meet their needs are the hardest hit,” he added.
Energy prices continue to witness the largest annual increase in the euro area, recording 38.3 percent in August (compared to 39.6 percent in July).
Food prices (including alcohol and tobacco) increased by 10.6 percent following 9.8 percent in July.
The prices of industrial goods increased by 5 percent, and the prices of services by 3.8 percent, both at an accelerating pace compared to the previous months.
In the Netherlands, consumer prices rose 13.6 percent year on year, the Netherlands Central Statistics Office reported Wednesday. In Poland, consumer prices increased by 16.1 percent year on year in August. Italy recorded an unprecedented inflation record since 1985, reaching 8.4 percent. As for France, inflation slowed down for the first time in more than a year, not only in the energy sector but also in the goods and services sectors. It recorded 5.8 percent on an annual basis, compared to 6.1 percent in July.
Portugal’s GDP stagnated in the second quarter of 2022 compared to the first three months of the year but rose by 7.1 percent year-on-year.
In terms of unemployment, the unemployment rate in Germany rose for the third month in a row, reaching 25.5 million people, with Ukrainian refugees entering the German labor market.
