While investors and traders alike eagerly anticipate the September monetary policy meeting, economic data from the Eurozone continues to show steady progress. This, in turn, is likely to put pressure on the European Central bank officials.
At the last monetary policy meeting in August, ECB officials said that while the current pace of QE will run its course, the central bank would discuss at some point about scaling back the QE purchases.
The ECB currently purchases 60 billion euro in sovereign bonds and corporate bonds. The last taper to the QE was a reduction of 20 billion euro. Despite sending subtle hawkish signs, the ECB maintained a cautious tone noting that a premature exit to QE would be disastrous.
Officials also remained tight-lipped on inflation so far noting that there needs to be further evidence of inflationary pressures taking ground.
Eurozone core inflation inches higher
The flash estimates from the Eurostat office released last week brought some cheer to the ECB hawks. According to official data, headline consumer prices remained steady at 1.3% for the month of July. In June, consumer prices rose 1.3% as well.
Core inflation, which strips the volatile food and energy prices showed a modest improvement. According to flash estimates, core inflation rate rose to 1.2% in July, following a 1.1% increase in the previous month.
Eurozone flash inflation estimates for July 2017
Although both measures of inflation remain well below the ECB’s 2% target rate, the expectations that the central bank will cut back on QE remains high.
The Eurostat data showed that energy prices were once again responsible for pushing prices higher. In July, energy prices rose 2.2% compared to 1.9% in June. This was supposed to be the highest annual rate in energy prices.
Services also rose 1.5% during the month, slightly down from 1.6% increase registered last month. Meanwhile, food, alcohol and tobacco prices remained steady at 1.4%.
