August Inflation in Eurozone Stays at 2016 Low

Eurozone inflation in August remained half the target level of the European Central Bank.

Consumer prices in the Eurozone in August rose by 1% in annual terms, according to the final data of the Statistical Office of the European Union (Eurostat). The result coincided with a preliminary assessment.

A month earlier, inflation was also 1%. The growth rate of prices in July and August was the lowest since November 2016. The inflation target has been set by the European Central Bank at “just below 2%.”

Compared to the previous month, consumer prices in August grew by 0.1%. Core inflation, which does not take into account volatile prices for energy, food and alcohol, remained at the level of 0.9% in July.

Energy prices in August fell 0.6% year on year after rising 0.5% in July. Food, alcohol and tobacco in August rose 2.1% after rising prices by 1.9% a month earlier.

Rising prices for services accelerated from 1.2% to 1.3%.

Consumer prices in the European Union in August rose by 1.4% in annual terms and by 0.2% compared to July.

Among EU countries, the minimum annual inflation is registered in Portugal (-0.1%), Greece (0.1%) and Spain (0.4%). The highest annual price increases were recorded in Romania (4.1%), Hungary (3.2%), the Netherlands and Latvia (3.1% in both countries).

Inflation in Germany, Europe’s largest economy, slowed to 1% in August from 1.1% a month earlier. In France, inflation remained at 1.3%, in Italy it accelerated from 0.3% to 0.5%.

Earlier, the European Central Bank, following the results of the September meeting, announced a reduction in the deposit rate and resumption of purchase of bonds in order to stimulate the Eurozone economy.

The deposit rate has been reduced by 10 basis points to minus 0.5% per annum. Net asset purchases will be resumed from November 1. Assets will be valued at € 20 billion per month.

The central bank also lowered its inflation forecast for the Eurozone for 2019 from 1.3% to 1.2%. The forecast for 2020 is reduced from 1.4% to 1%, for 2021 – from 1.6% to 1.5%.


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