Euro zone inflation rises above ECB target


Euro zone inflation rose faster than expected this month, moving decisively past the European Central Bank’s 2% target with much of this year’s surge still to come.

Inflation in the 19 countries sharing the euro accelerated to 2.2% in July from 1.9% a month ago, easily beating analysts’ expectations for 2% as energy prices continued to surge, data from Eurostat, the EU’s statistics agency showed on Friday.

Inflation is expected to accelerate further in the coming months and will likely peak over 2.5% towards the end of the year, with risks skewed towards higher figures, analysts say.

The figures are still unlikely to worry ECB policymakers, who have already warned of a temporary spike in inflation and made clear they would not adjust policy as the one-off factors behind the rise, such as higher oil prices and taxes, are likely to fade next year.

Indeed, the ECB even promised a longer period of easy policy when it unveiled a new strategy earlier this month as inflation beyond this spike is likely to languish under its target for years to come.

Underlying price pressures also remained muted, as ECB policymakers predicted, and even with record stimulus from the bank, core inflation is only likely to pick up very slowly.

Underlying inflation, or prices excluding volatile food and fuel prices, held steady at 0.9% while an even narrower measure, which excludes alcohol and tobacco prices, eased to 0.7% from 0.9%.