Commerzbank’s Dr. Ralph Solveen notes that Eurozone inflation fell to 2.8% in June, mainly on lower energy prices, while core inflation eased to 2.4%. The bank expects overall inflation to stay close to 3% in coming months. With firms likely to pass on still-elevated energy costs, Commerzbank anticipates another ECB rate hike in September.

Inflation easing but still elevated

"In the coming months, the inflation rate is likely to remain close to 3%, to which the ECB would probably respond with another interest rate hike at its September meeting."

"We expect the inflation rate to remain close to 3% in the second half of this year as well."

"Although energy prices are likely to fall slightly, companies are expected to increasingly pass on their energy costs – which remain higher than they were before the start of the Iran war – to their customers, meaning that the indirect effects feared by the ECB will intensify for the time being."

"The central bank is likely to respond to this with another interest rate hike in September."

"However, this should likely be viewed more as a counter-movement to the sharp increase in the previous month rather than as a sign of a sustained reduction in underlying price pressures."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)