Eurozone inflation hits record 8.6% in June

Price growth in the eurozone hit a new record high of 8.6 per cent in June, intensifying tensions between rate-setters at the European Central Bank over the speed of planned interest rate rises.

Eurozone inflation increased from 8.1 per cent in May, after a sharp acceleration of food and energy prices in many countries offset the slowdown in German inflation caused by government subsidies on transport and electricity.

Energy prices in the eurozone rose almost 42 per cent in June as Russia reduced the supply of natural gas to Europe, while food, alcohol and tobacco prices rose 8.9 per cent.

Core inflation, excluding more volatile energy and food prices, slowed slightly from 3.8 per cent in May to 3.7 per cent in June, according to data released by Eurostat on Friday.

Services prices slowed to 3.4 per cent, while non-energy industrial goods prices continued to accelerate to 4.3 per cent.

ECB president Christine Lagarde this week stuck to the central bank’s plan to begin raising interest rates with a quarter percentage point increase on July 21. A bigger move is expected in September, unless there is a rapid improvement in the inflation outlook.

Some hawkish rate-setters on the ECB’s governing council plan to push for a larger rate rise of 50 basis points in July because of concerns over the way price pressures continue to rise.