Eurozone core inflation fell to 2.4% as ECB faces second-round effects
The European Central Bank deposit rate is set to rise to 2.5%, but recent data shows energy prices have not raised broader inflation.
Frankfurt will almost certainly hold a rate-hike meeting on Thursday, with market odds placing a quarter-point increase close to certainty. This would lift the European Central Bank's deposit rate from 2.25% to 2.5%. August data confirmed eurozone inflation hit 3.3%, the highest since September 2023. Energy inflation surged to 14.3%, up from 10.3%. However, core inflation excluding food, alcohol, and tobacco fell to 2.4% from 2.5%. Services inflation also dropped to 3% from 3.3%. ECB economists published a new paper on Tuesday, though the document remains incomplete in available sources. The path leading to this decision has been compressed since June, when the bank raised rates to 2.25% following the energy shock from the Iran war. Christine Lagarde previously pointed toward September regarding rate movements.
