(Kitco News) - Euro area annual inflation rose to a record 9.1% according to the latest flash reading from Eurostat. This could now increase analyst calls for the European Central Bank to increase interest rates by 75 bps hike at its September meeting.
The CPI reading indicated that energy costs contribute to the main bulk of the price rises.
The report noted, that the main component of euro area inflation, energy is expected to have the highest annual rate in August, rising 38.3%, compared with 39.6% in July. At the same time, food, alcohol & tobacco prices rose 10.6%, compared with 9.8% in July. Non-energy industrial goods increased 5.0%, compared with 4.5% in July and prices for services rose 3.8%, up from 3.7% in July).
Economists and analysts are still expecting CPI to rise future in the future and predict it could hit double digits. The ECB increased interest rates by 50 bps in July and is expected to hike again in September. The debate at the moment is if it will be a 50 or 75 bps rise.
The latest money market pricing is putting the odds between 50-60%.
"I think 75 basis points should be among the options for September," said Estonia's ECB member Muller. "We should not be too timid with policy moves as inflation has been too high for too long and we are still far below the neutral rate."
Following the event, EUR/USD picked up off the lows of the day near 0.9973 to trade at 0.9986. The DAX index took a drop as all the talk of rate hikes hits risk sentiment adding to the recent Powell-induced fall following his Jackson Hole speech.
