Eurozone inflation picked up in August, reaching 2.1% — the first time since April it has exceeded the European Central Bank’s (ECB) 2% target. The rise came slightly above economists’ forecasts and was driven mainly by higher food, alcohol, and tobacco prices, which rose 3.2% year-on-year.
Core inflation, excluding food and energy, remained steady at 2.3% for the fourth consecutive month. Services inflation eased to 3.1%, the lowest since early 2022, but remains a key area of focus for the ECB.
Analysts suggest that the uptick makes a December interest rate cut less likely, with markets now betting on a possible move only by March. Policymakers have been sending mixed signals: while some stress downward risks due to cheaper energy and a stronger euro, others warn of upside pressures from trade tariffs and global supply chain costs.
The ECB has kept rates on hold since July after a series of cuts earlier in the year. President Christine Lagarde said the central bank is in “wait-and-watch” mode as it assesses inflation risks.
For households, food price increases remain a particular concern, amplified by extreme weather events. Still, some economists expect inflation to gradually ease back below target in the coming years, potentially reaching under 2% by 2026.
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