Euro zone inflation slowed in August from July peaks thanks to slower growth in its two main drivers - fuel and food prices - but core inflation, which excludes them, rose, data showed today.
The European Union statistics office said consumer prices in the 15-country euro area fell 0.1 per cent month-on-month and confirmed its earlier estimate of a 3.8 per cent year-on-year rise, down from 4 per cent in July.
Prices in annual terms expanded more slowly thanks to slower growth in energy prices, which rose 14.6 per cent in August against 17.1 per cent in July.
Food, alcohol and tobacco prices increased by 5.6 per cent against 6.1 per cent in July.
But what the European Central Bank calls core inflation, a measure excluding the often volatile energy and unprocessed food prices, costs rose 2.6 per cent year-on-year, up from 2.5 per cent annual gains in each of the previous three months.
The ECB looks at core inflation to gauge whether fuel and food price rises are triggering price growth in other sectors of the economy in what it calls second-round inflation effects, which it is determined to prevent through interest rate rises.
Also the broader core inflation measure used by many economists, which excludes energy as well as food, alcohol and tobacco, rose 1.9 per cent yearly in August against 1.7 per cent in July.
The ECB wants inflation to be just below 2 per cent over the medium term and raised interest rates at the start of July by 25 basis points to 4.25 per cent to better anchor rising inflation expectations.
The bank expects to bring back inflation to its target only in 2010.