ECB’s Inflation Headache Could Prompt Further Rate Lift

It is premature to rule out a rise in European Central Bank interest rates to 4%, economist Peter Vanden Houte at ING writes in a note. Eurozone core inflation remained at 5.5% in July, and with base effects warping year-on-year figures, the important dynamic is inflationary evolution from month to month, Vanden Houte writes. While headline inflation has declined pretty rapidly, it remains above the ECB’s target of 2%, and core inflation looks set to be kept high by services inflation, he adds. If the central bank’s focus is on month-to-month development, then it may as such still opt to prolong its cycle of rate increases,…

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