Eurostat released CPI data for the euro zone which indicated inflation slowed down in July as the region’s growth was affected by the sovereign debt crisis.
Official statistics recorded a drop in CPI to 2.5 percent from June’s 2.7 percent , though in line with forecasts.
Growth slowed to a two-year low in the second quarter, reducing consumer demand. In an effort to curb the debt crisis and to narrow budget deficits, many European governments have cut back spending, which has hurt growth.
Yesterday’s EZ growth data showed that euro zone gross domestic product expanded by only 0.2 percent in the second quarter after a 0.8 percent gain in the previous period. That’s the worst performance since the euro region emerged from a recession in late 2009.
The European Central Bank is not expected to raise interest rates in its next monetary policy assessment meeting on September 8. Recently, ECB President Jean-Claude signalled his concern that price pressures may feed into wage demands and spark more persistent inflation after increasing borrowing costs a second time this year.