Euro Area CPI inflation lowest since July 2021

Annual consumer price inflation in the Euro Area has decelerated to 2.2% in August from 2.6% in July, in line with market consensus, preliminary data by Eurostat showed.

It has marked the lowest CPI inflation since July 2021.

The latest figure indicated that further progress had been made towards the European Central Bank’s 2% inflation target, thus, reinforcing the case for interest rate cuts.

Yet, the slowdown in inflation was mostly attributed to a sharp drop in energy costs, by 3% YoY, as base effects kicked in during the month.

In the meantime, inflation eased for non-energy industrial goods (0.4% YoY in August from 0.7% YoY in July).

Conversely, inflation accelerated for:

– services (4.2% YoY from 4% YoY in July);
– food, alcohol and tobacco (2.4% YoY from 2.3% YoY in July).

The bloc’s annual core inflation rate, which excludes volatile categories such as food and energy, eased to 2.8% in August from 2.9% in July.