Euro zone inflation reached a new record high in June just ahead of the European Central Bank's first rate increase in 11 years. Headline inflation came in at 8.6% for last month, according to preliminary figures from Europe's statics office Eurostat. That beat a prediction of 8.4% in a Reuters poll of economists.

Both France and Spain experienced new inflation records in June. The latter surpasses the 10% threshold for the first time since 1985. The ECB, which has vowed to tackle the surge in prices, is due to meet in late July to announce it's increasing rates. The rate had reached 8.1% in May.

The ECB has said it will hike again in September, meaning its main interest rate could return to positive territory this year. There are growing questions about the future of monetary policy in the euro zone amid fears of a recession. If the central bank were to move quickly in hiking rates, this could hamper economic growth even further.

Berenberg economists forecast an recession in the euro zone in 2023 with a GDP (gross domestic product) contraction of 0.8%. Further economic pressures from Russia's invasion of Ukraine could tip the region into a more proacted slowdown. The ECB forecast in June a GDP rate of 2.8% for the region this year.
Posted by GU gustav
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