MARKET NEWS

Eurozone inflation held steady at 2% in July, according to Eurostat, the European Union's statistics office, the same reading as the month before. A year earlier, the rate stood at 2.6%.

The confirmed figure was the final estimate for the month, and fell in line with the European Central Bank's (ECB) 2% target.

However, inflation in the EU ticked up to 2.4% from 2.3% in June, and 2.8% the previous year.

The lowest annual rates in the EU were registered in Cyprus (0.1%), France (0.9%) and Ireland (1.6%) and the highest annual rates were recorded in Romania (6.6%), Estonia (5.6%) and Slovakia (4.6%).

Compared with June, annual inflation fell in eight member states, remained stable in six and rose in thirteen.

The highest contribution to the annual euro area inflation rate came from services, followed by food, alcohol & tobacco, and non-energy industrial goods.

It comes as the ECB kept interest rates steady last month, after seven consecutive cuts, amid trade uncertainty. The main policy remained at 2%, while its deposit rate was on hold at 2.15%.

ECB president Christine Lagarde said during the last press conference: “We ourselves at the ECB have left our rates unchanged, and you could argue that we are on hold.

“We are in this wait-and-watch situation. And any monetary policy decision will for the future be decided on the basis of data, will be decided meeting by meeting, is not predetermined by any particular path.

“And I think the jury is out as to how quickly the uncertainty will be cleared under present circumstances.”

The ECB has already halved its policy rate from a record high of 4% in the space of a year after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia’s invasion of Ukraine.

Meanwhile on Wednesday, UK inflation jumped to its highest level in 18 months, amid higher food prices and transport costs.

Figures from the Office for National Statistics (ONS) showed the annual rate as measured by the consumer price index (CPI) climbed to an unexpected 3.8% in July, up from 3.6% in June. It is forecast to reach 4% by the end of the year.

Transport costs, mainly as a result of higher air fares, were the largest upward driver of prices. Petrol prices nudged higher compared with last year, when prices at the pumps were falling.

Food and non-alcoholic drinks were up 4.9% year on year in July, an increase from 4.5% in the 12 months to June.