Inflation surged to 10.8% in July, hitting a fresh peak not seen since September 1984. After slipping two-tenths on the consumer price index from the prior month, the latest data from the National Institute of Statistics (INE) still shows a strong upward trend. The peak previously came in June at 10.2% and marked a 37-year record. Those numbers helped spark a new government plan that included a provisional tax on unexpected profits for banks and energy firms.
Even with fuel prices easing, the CPI climbed again, driven by rising food and soft drink costs, electricity bills, and higher prices for clothing and footwear. These movements illustrate how price pressures have broadened across the economy, not just in a single sector.
Economy grew by 1.1% in the second quarter due to the increase in consumption
After the initial impact in the energy sector, the broader price level carried the pressure into the wider economy, as noted by analysts. Core inflation, which excludes energy and unprocessed food, climbed from 5.5% in the previous month to 6.1% in July, a level not seen since January 1993. The rise was accompanied by notable increases in the shopping cart and in staples like fruit and vegetables, underscoring how households are feeling the squeeze across multiple everyday items.
This momentum helped push euro area inflation to 8.6%, a 20-year high, compounding concerns about price stability. The renewed price pressures fed expectations of monetary tightening from the European Central Bank (ECB). The central bank delivered a 0.50 percentage point rate hike, the first increase in 11 years and the steepest move in more than two decades, signaling a decisive shift in policy settings.
Observers emphasize that the euro area’s higher interest rates are not a standalone action but part of a broader adjustment to debt dynamics and risk premiums that affect sovereign borrowing costs. While the monetary authority has pursued firmer policy to curb inflation, some regions still face varied effects from the debt and bond market developments. These dynamics influence financing conditions and consumer confidence across member states.