Runaway Services Inflation in Euro Area Spikes to Record

Eurozone inflation woes are escalating as the record-breaking surge in services sector prices persists, up 5.6% in July. Domestic price pressures, spurred by wage increases and robust profit margins, have taken center stage, overshadowing the significant decline in energy prices and tempering of food inflation. The stubbornly high “core” CPI at 5.5% underpins the growing problem. Despite the European Central Bank’s attempts to mitigate this through asset reduction and policy rate hikes, they seem to be losing the battle against entrenched inflation, posing a substantial economic risk.