Eurozone producer price inflation exceeded expectations in July on higher energy prices, signaling upside risks to inflationary pressure in the months ahead.
The producer price index rose 1.8 percent year-on-year in July, the same rate of increase as seen in June, data released by statistical office Eurostat showed Tuesday. Economists had forecast a slower growth of 1.6 percent.
Energy product prices climbed 4.8 percent annually during the month, marginally higher than the 4.7 percent rise in June.
While capital goods prices rose 1 percent, intermediate goods prices remained flat. Prices of durable consumer goods and non-durable consumer goods were higher by 1.9 percent and 2.1 percent, respectively than a year earlier, data showed.
Month-on-month, producer prices advanced 0.4 percent in July, recovering from the previous month's 0.5 percent decrease. Economists had forecast producer prices to rise 0.2 percent.
Consumer price inflation in the currency bloc remains above the central bank's target of 'below, but close to 2 percent'. In August, inflation increased to 2.6 percent.
The European Central Bank is set to announce its monetary policy decision on Thursday. The central bank is widely expected to disclose its strategy on bond purchase programme. The bank is also likely to cut its economic outlook for this year.
The interest rate now stands at 0.75 percent. The last reduction in interest rate was in July, when the ECB took the rate below 1 percent for the first time in ECB's history.
IHS Global Insight's Howard Archer said the ECB is likely to cut interest rates to 0.50 percent by October, with a move possible as soon as its September meeting this Thursday.
Output prices in the European Union moved up 0.4 percent compared to June, taking the annual growth to 1.5 percent, data showed.
Among the member states, the largest increase in the total index was observed in Cyprus, followed by Hungary, Bulgaria and Romania. Meanwhile, decreases were recorded in Denmark, Sweden and the United Kingdom.
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