Eurozone annual inflation fell to 2.2% in August 2024, driven by a sharp drop in energy prices and favourable base effects. Core inflation remains stubborn at 2.8% annually due to rising services costs. ECB’s Isabel Schnabel warns against potential rate cuts due to ongoing challenges in monetary policy.
The unemployment rate in the Eurozone eased from 6.5% to 6.4% in August, below market forecasts, with Germany playing a significant role in cooling overall inflation. Germany saw inflation drop to 2% annually in August, below expectations, while other countries like Belgium experienced a surge in inflationary pressures.
Market reactions to the inflation data were mixed, with the euro holding steady against the dollar, yields on sovereign bonds remaining mostly unchanged, and European stocks continuing their upward trend. The Euro Stoxx 50 gained 0.6%, with top performers including Adidas, LVMH, and Amadeus IT.
The decline in inflation comes amidst speculation that the ECB may consider lowering interest rates, but Schnabel cautions against moving too quickly due to persistent pressures in the services sector. Overall, the Eurozone economy continues to navigate challenges as inflation eases and unemployment rates fluctuate across member states.
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