In August 2024, annual inflation in the Eurozone fell to 2.2%, the lowest level in over three years, driven by a sharp drop in energy prices. Core inflation, excluding volatile components, also slightly declined to 2.8% annually, but rose by 0.3% on a monthly basis due to higher services prices. ECB Executive Board member Isabel Schnabel cautioned against immediate rate cuts, highlighting the ongoing challenges monetary policy faces.
Unemployment in the Eurozone also decreased to 6.4% in August, below market forecasts of 6.5%. While Germany experienced a decrease in inflation, other member states like Belgium saw a surge in inflationary pressures, with Belgium recording the highest inflation rate at 4.5% annually.
Market reactions were mixed, with the euro holding steady against the dollar and yields on sovereign bonds remaining largely unchanged. European stocks continued to rise, with the Euro Stoxx 50 gaining 0.6% and individual companies like Adidas and LVMH seeing positive growth.
Despite the overall decrease in inflation, the services sector remains a strong driver of core inflation in the Eurozone, prompting caution from policymakers. As economic conditions continue to evolve, the ECB will need to carefully consider the possibility of interest rate adjustments in the future.
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