Euro Inflation Surges to 3.3%, ECB Rate Hike Looms

European inflation has picked up pace, with headline inflation hitting 3.3% in August, its fastest annual rate since September 2023.

This marks the third month in five that price growth exceeded the European Central Bank's (ECB) target by at least a full percentage point, virtually sealing another interest rate hike from the ECB at its upcoming meeting in Berlin next week.

While core inflation and services inflation actually receded in August, the ECB is prioritizing containing an oil-driven upturn in overall price growth, wary of repeating the 2022 energy shock that saw inflation peak at 10.6% in October.

The real policy rate in Europe has been meaningfully negative since April, with the ECB hiking rates in June and signaling limited patience for another inflation overshoot at its July meeting.