Figures from Eurostat have showed that inflation in the eurozone was 2.5% in July, lower than the 2.7% that was estimated. The European Central Bank, which is aiming to keep the rate of inflation at no more than 2% has been increasing interest rates in an attempt to control it. Now that the rate of inflation appears to be slowing, questions have been raised as to when interest rates will next be increased.
Economists have speculated that this decline in inflation may mean that interest rates may not be increased again this year. Howard Archer from IHS Global Insight suggests that although raising interest rates again is possible, the sluggish growth of the eurozone combined with the debt problems may be enough to dissuade the EBC from imposing further financial restrictions. He further suggests that the fact that the effects from the rising costs of commodities, which could be severe, are being controlled well, will act as a further cause for them to leave interest rates alone. Archer predicts that interest rates will stay at 1.5% for the remainder of this year and will slowly creep up over the course of next year to around 2.25%.

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About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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