Eurozone inflation remained at 3.2% in August, slightly below an earlier estimate of 3.3%, the European Union statistics office reported Thursday. Consumer prices had risen 2.9% in July. The European Central Bank raised interest rates by 0.25 percentage points last week to 2.5% in response to the inflationary surge.
Energy is the main driver. Prices for energy products jumped 14.3% year-on-year in August, propelled by oil market turbulence linked to the Iran conflict. The ECB has warned that the energy shock risks embedding persistent price pressures through so-called second-round effects — a potential wage-price spiral driven by higher fuel and production costs feeding into broader inflation.
ECB projections suggest total inflation will remain materially above its 2.0% target through at least the first half of 2027. Financial markets are pricing in a further rate increase by year-end as traders anticipate continued tightening ahead.
Daniel Hartmann, chief economist at Bantleon AG, said upward risks are widespread. Secondary effects from the energy shock — including higher transport and packaging costs, pricier agricultural commodities, and drought-related supply pressures — typically lag by six to nine months before fully registering in food inflation, he said. Transport services such as flights, courier and taxi services, car rentals, public transit and package holidays face similar delayed cost pass-throughs.
"The inflation rate in the euro zone could end up above 4.0%," Hartmann warned.
