Eurozone annual inflation is expected to be around 8.9%, according to Eurostat, the European Union's statistical office. Photo credit: Freepik.

Energy Crisis Drives Eurozone Inflation Rate Up To 8.9% For July – Eurostat

New data released by Eurostat, the EU’s statistical office, estimates the Eurozone inflation rate at 8.9% in July, far exceeding the European Central Bank (ECB) target of 2%. In July, the ECB responded to the crisis by raising benchmark interest to 0.50% from the record low of 0% which had been in place since 2016. The was the first increase in interest rates in the Eurozone since 2011. 

The high inflation is mainly due to the sharp rise in energy prices, which are up 39.7% year-on-year according to July figures, though this is slightly down from the annualised rate of 42% recorded in June. July’s overall rise in inflation surprised analysts, who had expected the pace of price increases to remain at the June level.

“Gas supply concerns are keeping prices high,” said Bert Colijn, an economist with financial services firm ING. “Natural gas market prices reached new highs this month, which is again reflected in consumer prices. Rising transportation costs, inventory shortages and uncertainty over Ukrainian supplies are driving up producer prices. However, as food commodity prices are falling, there may be some relief in the second half of the year.”

Annual inflation in the Czech Republic rose to 17.2% in June from 16% in May. In the past three months it has reached the highest level since December 1993. According to Eurostat, Estonia had the highest inflation in the euro area in July, with prices rising 22.7% year-on-year. Prices rose slowest in Malta, where inflation was 6.5%. 

In a separate report, Eurostat reported that quarterly growth in the eurozone economy accelerated to 0.7% in the second quarter from 0.5% in the first quarter. However, the year-on-year growth rate slowed to four percent from the previous 5.4%.

This article was originally published on Brno Daily.