Bloomberg: German inflation climbs to 2.9% as ECB faces rate-hike call

Inflation in Germany rose to 2.9% in August, strengthening the case for the European Central Bank (ECB) to raise interest rates next month.

Consumer prices increased by 2.9% year-on-year, up from 2.8% in July, according to preliminary data. The figure was below the 3.1% median forecast in a Bloomberg survey, but marked the highest inflation rate since April.

Higher energy costs were the main driver, while inflation in services and food eased.

The figures come after inflation also accelerated in France and Spain, with higher oil and gas prices adding to pressure on the ECB to tighten monetary policy.

The ECB has already raised borrowing costs once and is expected to make another increase on 10 September. Financial markets are also pricing in further monetary tightening next year.

Slovenian Governing Council member Primoz Dolenc said last week that there was a case for a September rate increase.

The ECB's deposit rate currently stands at 2.25%, a level officials consider neither stimulative nor restrictive. The eurozone economy has remained resilient, supported by increased military spending and investment in artificial intelligence.

ECB officials have also discussed whether monetary policy may need to become "mildly restrictive", which could require more than one quarter-point rate increase.

Policymakers are monitoring the risk that higher inflation could lead to so-called second-round effects, including broader price and wage increases.

In Germany, the expiry of temporary fuel-price relief in June contributed to August inflation, with higher heating oil and petrol costs. Education costs also rose at the start of the new school year.

Eurozone inflation is expected to have increased to 3.3% in August, according to the median estimate in a Bloomberg survey ahead of Eurostat's data release.

By Aghakazim Guliyev