Eurozone Inflation Hits 2.9% Amid Energy Price Uncertainty

Consumer prices in the eurozone rose by 2.9% year-over-year in July, according to preliminary estimates from Eurostat. This increase is a slight rise from June's annual inflation rate of 2.8%. Economists had predicted an inflation rate of 2.9%, making the actual figure largely as expected.

The main driver behind this rise is energy prices, which have increased due to ongoing conflicts in the Middle East. Frederik Engholm, Nykredit's chief strategist, notes that the renewed unrest has caused uncertainty about inflation developments in Europe. He also highlights core inflation, which excludes fluctuating energy and food prices, rising from 2.4% to 2.5%. This increase may be a concern for the European Central Bank (ECB), which aims to keep inflation around 2% in the medium term.

Service inflation picked up again, with service prices rising more quickly than overall inflation. According to Engholm, this is a bigger headache than overall inflation rising, as service and core prices are more stubborn. The ECB monitors service inflation closely because it is largely driven by wages and domestic demand.