FILE PHOTO – Flags of the European Union fly in front of the European Central Bank in Frankfurt. (is associated with: «Eurozone inflation hits three-year high, piling pressure on ECB to act») Michael Brandt/dpa
Inflation in the eurozone rose sharply to its highest level in nearly three years in August as energy prices surged, preliminary data from the European statistics agency Eurostat showed on Tuesday.
Consumer prices rose 3.3% from a year earlier, up from an annual inflation rate of 2.9% in July and the highest since September 2023, when inflation stood at 4.4%.
Inflation remains well above the European Central Bank’s (ECB) medium-term target of 2%.
Core inflation, which excludes food, alcohol and energy prices, meanwhile eased to 2.4% from 2.5%, confounding expectations that it would remain unchanged.
Economists widely expect the ECB to raise its key interest rates by 25 basis points at its next monetary policy meeting on September 10.
The central bank raised rates in June for the first time in nearly three years before leaving them unchanged at its July meeting.
“For the European Central Bank, the jump in the headline inflation rate makes a September hike easier to sell,” ING economist Bert Colijn said.
“But the stubbornly benign core inflation rate should make for an interesting debate about a possible subsequent hike into restrictive territory,” he added.
“An interest rate hike at next week’s ECB meeting is long overdue,” Commerzbank chief economist Jörg Krämer said. He said many companies were likely to pass higher energy costs on to customers.
Stephanie Schoenwald, an economist with Germany’s KfW bank, also said the latest figures should be enough to prompt the ECB to raise rates again in September.
“For the ECB, the findings are likely to be sufficient to take another step upwards on interest rates in September,” Schoenwald said.
However, she saw no need for further rate increases beyond that as long as energy prices remained the main driver of inflation.
Energy price growth accelerated sharply in August, with prices jumping 14.3% from a year earlier, compared with a 10.3% increase in July.
The increase comes against the backdrop of the war between Iran and the United States. With no lasting reopening of the Strait of Hormuz in sight, oil flows through the key shipping route remain disrupted.
Services inflation eased to 3.0% from 3.3%, while prices for non-energy industrial goods rose 1.2%, accelerating from 0.9% in July. Prices for food, alcohol and tobacco increased 1.2%, unchanged from the previous month.
Compared with the previous month, consumer prices in the 21-member eurozone rose 0.4% in August.