Eurozone Inflation Hits 3.3% as Middle East Tensions Fuel Price Pressures

The Eurozone inflation rate increased to 3.3% in August, marking its highest level since September 2023. This rise was largely driven by renewed tensions in the Middle East, which led to higher energy costs and increased price pressures.

Despite a slight decrease in core inflation from 2.5% to 2.4%, economists warn that geopolitical factors could continue to impact prices in the coming months.

The increase in inflation has added pressure on the European Central Bank (ECB) to consider further rate hikes, with market expectations suggesting another 25 basis points hike in its September 10 policy meeting.

However, ECB policymakers are likely to signal that they will stop the tightening cycle after the next hike, assuming current gentle policy adjustments will keep price pressures under control.