Eurozone inflation rises to 3.3% in August, hitting the highest level since 2023

(1) The preliminary annual inflation rate in the Eurozone for August rose from 2.9% in July to 3.3%, in line with market expectations and marking the highest level since September 2023. This is well above the European Central Bank's 2% target, mainly driven by soaring energy prices due to ongoing Middle East conflicts. The data strengthened expectations for an interest rate hike this month, with the market fully pricing in a 25 basis point increase to 2.5%. (2) Energy inflation jumped to 14.3%, the highest since January 2023, while inflation for unprocessed food and non-energy industrial goods also accelerated. Service sector inflation dropped to a four-month low of 3.0%, and core inflation, excluding energy and food, edged down to 2.4%, below the expected 2.5%. (3) Among major economies, inflation in Germany, France, Spain, and Italy all accelerated compared to July.