In June, consumer prices rose by 10.2% year-on-year (HICP inflation 10%) from 8.7% in May, bringing inflation to its highest level since 1985. The acceleration is mainly driven by a rise in fuel prices and food. Hotels and catering establishments saw strong price increases compared to June last year. At yesterday's ECB forum in Sintra, Portugal, President Christine Lagarde confirmed that the central bank will stick to its approach of raising interest rates by 25 basis points in July. If the rise in other eurozone countries is also much stronger than expected, it will increase the pressure on the ECB for a more substantial rate hike in July. And it raises the likelihood of a 50bp rate hike in September, too. Spain is the first country in the eurozone to come out with its inflation figure for June. - ING Economics
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