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Eurozone rate-setters have downplayed worries about high inflation in the region, with minutes from the July meeting indicating a willingness to consider rate cuts at the next policy gathering.
In July, the European Central Bank maintained its deposit rate at 3.75 per cent amid concerns that underlying price pressures could persist.
Final inflation data for July revealed that core inflation, excluding food and energy prices, held steady at 2.9 per cent. In the dominant services sector, inflation only slightly decreased to 4 per cent from 4.1 per cent in June.
Despite higher-than-expected core inflation readings for June, officials are still open to the possibility of lowering rates in September, as stated in the meeting minutes.
The ECB, which aims for a 2 per cent inflation rate, reduced its deposit rate from 4 per cent in June. Market expectations point towards another rate cut when the council convenes in three weeks.
Analysts believe that the recent data releases and potential stagflationary pressures will fuel discussions at the ECB, but are not significant enough to prevent a rate cut in September.
Insights from the meeting minutes suggest that the governing council is considering a policy review in September. Wage data released by the ECB further support hopes of a rate cut, with negotiated wages growing at a slower pace in the second quarter of 2024 compared to the first quarter.