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EUR: higher-than-expected inflation could lead to tighter policy

By Michael Cooper September 1st, 2017

Figures released yesterday showed that unemployment in the eurozone held steady at 9.1% in July, which is the lowest it has been since February 2009. The number of unemployed people rose by 73,000 in July. In Germany, the jobless total fell by 5,000 in August against an expectation of 6,000.

Inflation in the eurozone rose to 1.5% in August which was higher than the 1.4% rate predicted by economists. This was said to be a result of energy prices rising by 4% year-on-year.

Higher-than-expected inflation could bolster those in favour of the European Central Bank tightening their monetary policy in the future. However, Peter Vanden Houte at ING said that there is a ‘risk that an overshoot of the euro exchange rate could push inflation below 1.5%’. With that in mind, he said that he believes the ECB will announce a ‘dovish tapering’ in October. It will be fascinating to see what Mario Draghi and his colleagues decide next month and the effect it will have on the euro.