Inflation Boosts Rate Hike Case as Euro Zone Economy Surpasses Expectations

European Central Bank (ECB) policymakers have another data point to consider as they weigh whether to raise interest rates, after euro zone inflation ticked up in July. The rate of price increases rose to 2.9% from 2.8%, with energy prices being the main driver.

The Iran war-induced oil price surge contributed significantly to the increase, according to data released by Eurostat on Friday. A more closely watched figure on underlying inflation also accelerated to 2.5% from 2.4%, as services inflation rose to 3.3%.

While the July figures are unlikely to be a dealbreaker for the ECB, they add to an already strong case for another rate hike. The central bank has signaled that it plans to raise rates on September 10, and financial markets are betting on more than two rate hikes before October.