KOF Monetary Policy Communicator, July 2023

The Governing Council decided to raise the three key ECB interest rates by 25 basis points. The Council also decided to set the remuneration of minimum reserves at zero per cent, in order to preserve the effectiveness of monetary policy.

Annual HICP inflation in the euro area has declined to 5.5% in June, from 6.1% in May. Energy prices decreased again in June, dropping by 5.6% year on year. Food inflation remained high despite slowing to 11.6%. Inflation for goods and services followed diverging trends. Goods inflation continued its decrease to 5.5%, while services inflation rose to 5.4%, after its decline in May. Domestic price pressures remain strong. The drivers of inflation are changing, with rising wages and profit margins continuing to be robust, while external sources of inflation are easing. Past energy costs continue to spill over into the real economy. Most measures of longer-term inflation expectations currently stand at around 2%, but some indicators remain elevated and thus should continue to be monitored.