European consumers face higher prices when they go to supermarkets.
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Eurozone inflation rose to 2.1% in August, according to the latest flash data from Statistics Agency Eurostat on Tuesday.
The economists voted by Reuters had expected it to change at 2% from July.
Core inflation, which removes prices for more volatile foods, energy, alcohol and tobacco, has not changed since July 2.3%. Meanwhile, the carefully viewed service printing was slightly lower in August, at 3.1% compared to 3.2% in July.
At 2.1%, the latest inflation rate for the Eurozone is slightly higher than the European Central Bank’s 2% target.
The euro fell 0.6% against the dollar to $1.1640. Pan-European Stoxx 600 It was trading 0.7% lower on Tuesday morning.
The central bank is expected to hold its key interest rate at 2% in July and maintain its stance the next time they meet in September, according to the majority of economists voted in Reuters.
The EU trade contract with the US, signed in late July, removes uncertainty over tariffs, but there are concerns that the 15% obligation to EU exports to the EU could still place emphasis on economic activity.
The Eurozone grew 0.1% in the second quarter compared to the previous quarter, Eurostat data showed in late July.
You can pause the ECB rate
A slight increase in headline inflation in August is unlikely to make a big difference to ECB policymakers the next time they meet, Capital Economics chief European economist Andrew Kenningham said Tuesday.
“We’ll definitely look to not change interest rates at next week’s meeting for months, perhaps beyond that,” he said in an email analysis.
“The most important thing for the ECB is that service inflation also touched on 3.2% in July and 3.1% in August. This should provide a guarantee that service inflation rates have been the lowest since March 2022 and that domestic price pressure continues to sink.”
“We’ll preview the upcoming ECB meetings later in the week, but in short, the banks are likely to hold interest rates on hold for a while,” he said.
Schroders’ eurozone economist Irene Lauro agreed that the ECB would take the time given the interest rate trajectory.
“As trade uncertainty is eased, the eurozone recovery is set to gain momentum as businesses strengthen their borrowing and investment. In this environment, the ECB may be cautiously stable in September. The resilience of core inflation will be ending policy regularization and the ECB will closely monitor growth dynamics before making any next move.
