Eurozone inflation rose to 3.3% in August as energy prices and the Iran war drove costs higher.
Eurozone inflation rose to 3.3% in August, up from 2.9% in July. This increase was primarily driven by energy prices, which accelerated to 14.3% from 10.3% in the previous month. The statistics office Eurostat reported that energy supply shocks, largely caused by the ongoing war in the Middle East and the blockage of the Strait of Hormuz, were the main drivers of the increase. In contrast, core inflation, which excludes volatile components like food and alcohol, dipped slightly to 2.4% from 2.5% in July. The European Central Bank is expected to raise interest rates again at its September 10 meeting. Market pricing indicates a 98.9% probability of a 25 basis point increase to 2.5%. The European Central Bank economists Kristina BarauskaitÄ GriÅ”keviÄienÄ and Claus Brand noted that the current energy supply shock dominates the inflation picture, differing from the 2021-22 period when inflation was driven by a combination of supply and demand-side factors. The European Central Bank also delivered its first rate hike in three years on June 11, raising the deposit rate from 2.2% to 2.25%.
Sources
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Euro zone inflation is back above 3%. Higher interest rates are likely to follow
CNBC
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ECB rate hike looms as energy shock pushes inflation to 3.3%
Euronews.com
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ECB's Simkus says a hike in September is "not going to be enough", Econostream reports. 50bps hike is not needed.
Newsquawk