The European Union's statistics office reported on Tuesday that the eurozone's flash consumer price index (HICP) for August rose 3.3% year-on-year, accelerating from 2.9% in July and returning above the 3% mark, driven by higher energy costs. Nearly all of the increase was due to energy prices, with rises in crude oil and natural gas and wider refining margins contributing. Meanwhile, core inflation, which excludes volatile food and energy prices, slowed to 2.4% from 2.5% the previous month, and services inflation also eased to 3.0% from 3.3%. The data broadly aligns with the European Central Bank's outlook and suggests that the widely expected rate hike to 2.50% at the governing council meeting on the 10th will be a relatively straightforward decision.
Higher inflation supports ECB rate hike to 2.50%, raising policy rate.
Expected ECB rate hike likely pushes German bond yields up.
ECB rate hike expectation strengthens euro versus dollar.
