Tag: Eurozone

Posted on

Eurozone inflation hits ECB target in June 2025

ECB hits EU Inflation target

Eurozone inflation edged up to 2.0% in June, aligning precisely with the European Central Bank’s (ECB) target and marking a slight increase from 1.9% in May 2025.

The small rise was largely driven by persistent services inflation, which climbed to 3.3%, and steady increases in food, alcohol, and tobacco prices at 3.1%.

Core inflation, which excludes volatile items like energy and food, held firm at 2.3%, suggesting underlying price pressures remain stable. Energy prices, however, continued to decline, easing some of the broader inflationary strain.

The ECB, having already cut interest rates earlier this year, now faces a delicate balancing act. While inflation appears under control, economic growth remains sluggish, and ongoing trade tensions – particularly with the U.S. – could complicate the outlook.

With inflation now at target, attention shifts to whether the ECB will pause further rate cuts or act again to support the eurozone’s fragile recovery.

Posted on

Euro zone inflation rises to 2.6% in May 2024

Euro zone inflation

Eurozone inflation increased to 2.6% in May 2024, according to Eurostat’s announcement on Friday 31st May 2024.

Analysts had anticipated a 0.1% rise from the 2.4% headline figure reported in April 2024.

Core inflation, which omits the unstable effects of energy, food, alcohol, and tobacco, rose to 2.9% from April’s 2.7%. Contrary to the flat reading projected by economists.

A deviation from the expected 0.25% cut at the ECB’s June 2024 meeting would significantly surprise the markets, given the strong signals from policymakers in recent weeks.

Posted on

Euro zone inflation unexpectedly falls to 2.4% in March 2024

EU inflation

Eurozone inflation eased to 2.4% in March 2024, as indicated by preliminary figures released on Wednesday 3rd April 2024.

This decrease has increased expectations that interest rate cuts may start in the summer 2024.

Market analysts anticipate that the central bank will commence reductions in interest rates starting in June 2024, reflecting recent communications from the ECB.

Posted on

Euro zone inflation drops to 2.9% in October 2023

EU Inflation

According to the latest data from Eurostat, the statistical office of the European Union, the euro area annual inflation was 2.9% in October 2023, down from 4.3% in September 2023.

The main factor behind the decline in inflation was a sharp drop in energy prices, which fell by some 15% year-on-year in October 2023, compared to a 10.7% decrease in September. 

The euro area economy also contracted by 0.1% in the third quarter of 2023, after growing by 0.6% in the second quarter, according to preliminary estimates from Eurostat. This puts the eurozone on the brink of recession, as high interest rates and weak demand weigh on the economic activity. 

However, some analysts argue that the ECB’s monetary policy is too tight and risks choking off the recovery. They suggest that the ECB should adopt a more flexible approach and consider cutting rates or expanding its bond-buying programme if the economic outlook worsens.

Core inflation

Core inflation which excludes volatile food and energy prices dropped to 4.2% year-on-year in October 2023 from 4.5% in September 2023, according to European Union statistics agency Eurostat.

The agency also revealed Tuesday that the euro zone economy contracted by 0.1% in the third quarter, according to initial estimates, below consensus estimates for GDP to be unchanged from the previous quarter.

Predicition

The ECB expects the euro zone economy to grow by just 0.7% this year, by 1% in 2024 and 1.5% in 2025.

Posted on

EU interest rates up again to 4%

Eurozone interest rates

Eurozone interest rates have been hiked again to a record high by the European Central Bank (ECB).

The bank raised its key rate for the 10th time in a row, to 4% from 3.75%, as it warned inflation was expected to remain too high for too long.

The latest increase came after forecasts predicted inflation, which is the rate prices rise at, would be 5.6% on average in 2023. However, the ECB signalled that this latest hike could be the last for now.

‘The council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target’, the bank reportedly said. The central bank originally expected inflation to be ‘transitory’.

It added that it expected inflation in the 20-nation bloc to fall to around 2.9% next year and 2.2% in 2025.

As in other parts of the world, the eurozone has been hit by rising food and energy prices that have squeezed household budgets and from the Russia/Ukraine war. Central banks have been increasing interest rates in an attempt to tame inflation and slow rising prices.

More expensive to borrow

The theory behind increasing rates is that by making it more expensive for people to borrow money, the ‘consumer’ will then have less excess cash to spend, meaning households will buy fewer things and then price rises will ease. But it is a balancing act as raising rates too aggressively could cause a recession.

Interest rates in the UK are currently higher than in the eurozone at 5.25%, but UK inflation is also higher at 6.8%, and the Bank of England is expected to raise rates again next week.