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Euro area inflation jump strengthens case for an ECB rate hike in September

Headline inflation rose to 3.3% in August from 2.9% in July, with energy costs tied to the Middle East conflict cited as the main driver.

Reported · Written up by our desk · Central Banks

Commerzbank strategist Dr. Vincent Stamer said euro area inflation picked up in August, increasing to 3.3% from 2.9% in July as higher energy prices linked to the Middle East conflict weighed on the headline figure. He noted that core inflation edged down to 2.4%, but the renewed move above 3% in headline inflation is seen as reinforcing expectations for the ECB to raise rates in September, even as further hikes are viewed as less likely once inflation eases next year.

Stamer added that businesses, especially in manufacturing and food production, are expected to pass higher energy costs through to consumers in coming months. He pointed specifically to elevated natural gas prices as a factor likely to push costs higher in those sectors, which could keep upward pressure on core inflation over the coming quarters.

Latest closeNat gas $2.954 ▲0.7%

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