International conflict and higher energy prices pushed August inflation in the 21 eurozone countries to 3.3% from 2.9% in July. According to Eurostat data, the acceleration is primarily due to rising prices for oil and natural gas, as well as higher refinery margins.

Core inflation, excluding food and energy prices, however, slowed to 2.4%, suggesting that high energy prices are not yet triggering secondary inflationary effects.

This development is in line with the European Central Bank’s expectations. It is therefore almost certain that the bank will raise the deposit rate to 2.50% on 10 September. This would be the second rate hike this year.

The next strategic move remains uncertain. Weaker economic growth and modest wage growth give the European Central Bank room to pause rate hikes after September. However, due to persistently high energy prices, financial markets expect one or two more hikes, with the December meeting set to be key for further decision making.

(Reuters, max)