Inflation fell to 2.2% in Europe, clearing way for a European Central Banks Sept. Rate cut
Inflation in the 20 euro-using EU countries dropped to 2.2% in August, down from 2.6% in July, thanks to falling energy prices. This decline brings inflation closer to the European Central Banks 2% target and could pave the way for an interest rate cut.
Inflation in the 20 European Union countries that use the euro fell sharply to 2.2 percent in August, opening the door for the European Central Bank to cut interest rates as the ECB and the US Federal Reserve prepared to lower borrowing costs to support growth and jobs. The August figure was down from 2.6 percent in July, according to figures on Friday from European Union statistics agency Eurostat.
Energy prices fell in August by 3 percent, helping lower the overall figure, while inflation fell to 2 percent in Germany, the eurozone's largest economy. The monthly figure is now close to the ECB's target of 2 percent, the level considered best for the economy. The central bank is charged with maintaining stable prices under the treaty that set up the European Union. Not all of the EU's 27 countries use the euro. Economists expect the ECB to cut its key rate by a quarter point from 3.75 percent at its September 12 meeting, while the Fed is expected to cut rates from a 23-year high of 5.
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