Inflation in the 20-country eurozone climbed slightly in August, marginally exceeding the European Central Bank’s (ECB) target of 2%.
Price levels across the euro zone rose to 2.1% last month, new data released on Tuesday shows, creeping up from 2% in July, with the rise underpinned by increases in unprocessed food and a smaller drag from lower energy costs.
Underlying inflation, a more closely-watched figure which excludes volatile items like food and energy, remained unchanged at 2.3%, despite services inflation falling to 3.1% from 3.2% in July.
Price growth, the ECB’s primary focus, has slowed sharply in recent years in response to the bank’s aggressive monetary policy campaign to tame rising inflation, and has been on target for months, a rare success for the bank which undershot its mark for a decade before the pandemic, only to struggle with runaway prices in subsequent years.
Irish inflation, as measures by the ECB’s Harmonised Index of Consumer Prices (HICP), was predicted to rise to 1.8% in August, up from 1.6% in the previous month.
It follows data released by the Central Statistics Office (CSO) on Monday, which showed Irish inflation rose in the month, with food prices estimated to have risen by 0.4% in the last month and by 5% in the last 12 months.
Tuesday’s figures from Eurostat confirm the ECB’s own projection for inflation to fluctuate around its target through the end of 2025, as muted goods inflation and moderating energy prices offset what continues to be robust growth in the price of food and services.
As a result of the recent calm in price growth, markets expect steady interest rates in the coming months, even if policymakers are still likely to debate whether more easing may be needed on top of the two percentage points of rate cuts made since mid-2024.
For now, markets see just a one-in-four chance of a rate cut by December but pricing goes above 50% by early spring, suggesting that a debate on more easing is far from over.
The ECB will next meet on September 11 and economists overwhelmingly anticipate no change in its 2% deposit rate.