Eurozone inflation uptick strengthens case for ECB hold in September

Eurozone inflation rose to 2.1% in August, slightly above expectations of 2%.

The rise was driven by volatile food inflation and a further slowdown in the rate of energy price deflation.

Services inflation slowed to 3.1%, down from 3.2% in July, while core inflation was flat on the month, supporting the European Central Bank’s assessment of a disinflationary trend in the currency bloc.

With headline inflation hovering around the 2% inflation target and medium-term risks to inflation tilted to the upside, we expect the ECB to keep rates unchanged at its meeting later this month.