Eurozone Inflation Picks Up Pace in Blow to Rate-Cut Hopes

Inflation unexpectedly heated up in the eurozone this month, presenting a fresh challenge to policymakers looking for signs that eurozone price rises are easing sustainably.

Consumer prices were 2.6% higher on year in July, picking up pace from in June, according to EU figures released Wednesday. That defied economists’ expectations for a slight decrease in inflation over the month, and leaves the rate further from the European Central Bank’s elusive 2% target. Inflation heated up over the month in Germany, France and Italy, the eurozone’s three largest economies.

Core inflation, which strips out the often volatile effects of food and energy prices, meanwhile stayed stable, against expectations for a slight decrease. But services, a key focus for policymakers at the European Central Bank, did fall slightly.

That decline makes a cut to interest rates the most likely outcome in September, said Franziska Palmas, an economist at Capital Economics.

Still, the higher headline rate may give pause to the central bank as it mulls its next steps on the direction of interest rates in the 20-member eurozone.

The ECB cut interest rates in the currency union for the first time in five years last month, but has refused to be drawn on when and how quickly it will continue to lower rates from their current heights. Markets still expect a second cut to rates at the bank’s next policy meeting in September, but with less certainty than earlier in the summer.

“Until services inflation falls more significantly, the ECB is likely to continue to ease policy only slowly,” Palmas said.

Starbucks is making another major leadership change just one week after new CEO Brian Niccol started his job.

Michael Conway, the 58-year-old coffee chain’s head of North America, will be retiring at the end of November, according to a Monday filing with the Securities and Exchange Commission.

The decision came only six months after Conway took on the job. His position won’t be filled. Instead, the company plans to seek candidates for a new role in charge of Starbucks’ global branding.

The chief brand officer role will have responsibilities across product, marketing, digital, customer insights, creative and store concepts.

“Recognizing the unmatched capabilities of the Starbucks team and seeing the energy and enthusiasm for Brian’s early vision, I could not think of a better time to begin my transition towards retirement,” wrote Conway in a statement.

Conway has been at Starbucks for more than a decade, and was promoted to his current job—a newly created role—back in March, as part of the company’s structural leadership change under former CEO Laxman Narasimhan.

The coffee giant has been struggling with weaker sales in recent quarters, as it faces not only macroeconomic headwinds, but also operational, branding, and product development challenges.

Narasimhan was taking many moves to turn around the business, but faced increasing pressure from the board, shareholders, and activist investors.

One month ago, Starbucks ousted Narasimhan and appointed Brian Niccol, the former CEO at Chipotle, as its top executive. The stock has since jumped 20% in a show of faith for Niccol, who started at Starbucks last week.

When he was at Chipotle, Niccol made a few executive hires that were key to the company’s turnaround.

Eurozone Inflation Picks Up Pace in Blow to Rate-Cut Hopes

Consumer prices were 2.6% higher on year in July, picking up pace from 2.5% in June