Eurozone Inflation Fears Mount as French and Spanish Data Surprise

European inflation is firming, with latest data from France and Spain reinforcing concerns for the European Central Bank (ECB). French Consumer Price Index (CPI) accelerated to 2.4% year-over-year in August from 2.1%, while Spanish CPI jumped to 4.3% from 3.6%, largely due to stronger energy and fuel prices.

ECB Governing Council members Kazaks and Schnabel are framing themselves as hawkish voices, stressing the need to prevent persistent price pressures. Kazaks warned that above-target inflation cannot be allowed to become entrenched and said another rate increase in September is a considerable possibility.

In contrast, European economic sentiment indicators suggest markets are weighing higher inflation against still-fragile growth. Euro area economic sentiment for August rose 1.3 points to 98.4, while the EU indicator increased 1.0 point to 98.2, bringing both closer to their long-term average of 100.

ECB hawk Isabel Schnabel is expected to reinforce the need to preempt inflation persistence today in Wyoming, despite limited evidence of second-round effects so far.