The annual inflation rate in the Euro zone reached its highest level in ten years this month, and economic analysts expect the trend to continue. This starts raising big concerns for the European Central Bank, as well as for investors.

According to a preliminary estimate by the European Statistical Agency (Eurostat), the annual inflation rate in the Euro area reached 3% in August, from the level of 2.2% in July. This is a level of inflation that far exceeds the European Central Bank’s (ECB) target of 2%. It seems analysts didn’t expect that, as expectations had been set at a level of 2.7% for August.

The rise in inflation in the Euro area in August is mainly explained by the fact that energy prices increased by two digits, with an advance of 15.4%, while prices for non-energy industrial goods rose by 2.7%, and with 2% for food, alcoholic beverages and cigarettes.

Nevertheless, Eurostat data show that the core inflation – i.e., what remains after the elimination of prices for volatile goods, such as energy and food, accelerated to 1.6% in August, from 0.9% in July. Also, an indicator that in addition to energy and food prices excludes cigarette prices, rose to 1.6%, from 0.7%. Core inflation is the indicator closely monitored by the ECB in drawing up its monetary policy decisions.

Romania also registered the highest inflation rate in recent years

The inflation rate in Romania rose to 5% in July 2021, from the level of 3.9% in June, a record level in recent years. This was determined by increase in prices for non-food goods, which have risen by 7.64%, in services by 2,74% and in food goods by 2.33%, according to the latest data published by the Romanian National Institute of Statistics (INS) on price increases and the purchasing power of the national currency.

The Romanian National Bank also increased to 5.6% the inflation forecast for the end of 2021, according to a presentation made by the governor of the bank, Mugur Isărescu, compared to 4.1%, as previously estimated.

Eurostat’s inflation estimate is for the moment a preliminary one, and a revised estimate, including inflation data in the European Union, will be released on 17 September 2021.

High price tensions are worrying financial markets, which fear a potential rise in interest rates.


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