Eurozone inflation rises slightly above ECB target in August

Eurozone inflation edged up in August, surpassing expectations but remaining close to the European Central Bank’s (ECB) target.

According to Eurostat’s flash estimate, annual inflation in the 20-member bloc rose to 2.1% in August from 2.0% in July, slightly above economists’ forecasts of no change. On a monthly basis, prices increased by 0.2%, rebounding after a flat reading in July, Euronews reports. 

Core inflation, which excludes volatile items such as energy, food, alcohol and tobacco, held steady at 2.3% for the fourth consecutive month. The figure points to underlying price pressures remaining firm, but not accelerating at a pace that would alarm policymakers.

Non-energy industrial goods inflation was unchanged at 0.8%, while energy prices fell 1.9%, easing at a slower rate compared to the 2.4% decline recorded in July.

Price trends continue to vary across the eurozone. Estonia posted the highest annual inflation at 6.2%, followed by Croatia at 4.6%. France recorded one of the lowest rates at 0.8%, while Cyprus saw prices fall by 0.1%. Month-on-month, Belgium registered the sharpest increase with a 1.5% jump, while Greece, Lithuania, Finland, Latvia, Italy and Portugal all experienced mild deflation.

The ECB last met in July, when it opted to pause rate cuts after eight consecutive reductions. President Christine Lagarde said the central bank was “in a good place,” but noted that uncertainties linked to trade policy and global supply chains warranted caution.

With inflation broadly stable near target and the eurozone unemployment rate holding at a record-low 6.2%, markets expect no change in interest rates at the ECB’s next Governing Council meeting on 10 September. The deposit facility rate is likely to remain at 2% as the bank maintains a wait-and-see approach.

European equities weakened on September 2 as political risks in France and the Netherlands weighed on sentiment.

Germany’s DAX fell 1%, slipping below the 24,000 level for the first time since early August. Italy’s FTSE MIB and Spain’s IBEX 35 also declined, while France’s CAC 40 was little changed. The broader Euro STOXX 50 lost 0.5% and the Euro STOXX 600 shed 0.6%.

Among individual movers, luxury group LVMH rose 3.2% after HSBC raised its price target to €625 from €535. In contrast, Siemens dropped 2.9% and semiconductor equipment maker ASML fell 2%.

In currency trading, the euro weakened 0.7% to $1.1630 as investors sought the dollar’s relative safety.

Meanwhile, precious metals surged, with gold breaking above $3,500 per ounce for the first time on record. Silver also extended gains, climbing past $40 per ounce, its highest level since September 2011.

By Sabina Mammadli