EU Inflation Rates Above Target, But Not Yet in Crisis Mode

The European Monetary Union (EMU) is grappling with high inflation rates, but experts say it's not quite at crisis levels. According to Haver Analytics, the headline inflation rate in the euro area rose by 0.4% in August, while the core rate increased by just 0.2%. The three-month inflation rate for headline HICP inflation is 3.3% annualized, and the pace for the core is only 2.4% annualized.

While these numbers are above the 2% target set by the European Central Bank (ECB), they don't necessarily require an immediate policy response. The sequential data shows a mixed picture, with headline inflation rates topping 3% and in one case reaching 4%, while core inflation remains relatively contained.

The Big Four economies in the monetary union - France, Germany, Italy, and Spain - all have year-over-year inflation rates for the headline that are excessive compared to the target. However, core inflation is mostly contained, with only a few countries showing mildly hot numbers.

For the ECB, this presents a difficult decision: whether to hike interest rates again or maintain a more cautious approach. While some experts may be calling for action, others argue that a 2% target doesn't necessarily mean 2.4% is an outrageous miss.