“Underlying inflation has probably peaked” (ECB)

2023-08-04 15:49:00

Is this the end of the price increase? This Friday, August 4, the European Central Bank (BCE) said core inflation in the euro zone has probably peaked. This portends a slowdown in price growth.

ECB: optimistic, Christine Lagarde considers that inflation “is getting closer to the goal”

“The median and average measures of underlying inflation suggest that it probably peaked in the first half of 2023,” ECB economists wrote in an article published on Friday. “Most” of the measures of underlying inflation monitored by the ECB “show signs of easing” and the July figure was “broadly in line” with the expectations of the banking institution, add the specialists.

Even though the rise in services prices accelerated in July, the ECB said on Friday that its own measure of the persistent and common component of inflation (PCCI) « seems to have started to decline for services as well ».

Towards a pause in the hike in key rates?

This could fuel market expectations of a pause in the ECB’s rate hike at its September meeting, as core inflation – which is discounted from the most volatile prices – is closely watched by officials. of the institution.

Earlier this week, as speculation continued around a possible pause on rate hikes after September, Christine Lagarde, president of the banking institution europeandid not take a clear position. “ There may be another increase in policy rates, or perhaps a pause “, she said

“A break, whatever the date, in September or later, would not necessarily be definitive,” however tempered the ECB official. To envisage a pause, it would be necessary, according to her, that “inflation is permanently brought back to its target” of 2%.

The ECB raises its rates by 0.25 point, the highest since 2001

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Record level for rates

On July 27, the ECB announced a 25 basis point increase in its key rates, the ninth consecutive increase. The latter brings rates within a range of 3,75% To 4,25%. The deposit rate, which is a reference, rose to the same level as its historical peak of 3,75%reached between October 2000 and May 2001.

(With agencies)