Eurozone inflation hits three-year high of 3.3%

Eurozone inflation rose to 3.3 percent in August, its highest level in three years, as energy costs increased, official European Union data showed Tuesday.

The rate reported by Eurostat was up from 2.9 percent in July and remained above the European Central Bank's two-percent target. The August figure was in line with forecasts by analysts for Bloomberg.

Eurostat said energy was expected to have the highest annual rate among the main components of euro area inflation. Energy prices rose 14.3 percent in August after increasing 10.3 percent in July.

Energy costs have risen during the US war against Iran and the near-total closure of the Strait of Hormuz, a key energy trade route.

Core inflation, which excludes volatile energy and food prices, slowed to 2.4 percent in August from 2.5 percent in July. Food and drinks inflation stayed at 1.2 percent.

The European Central Bank is expected to raise interest rates again at its September 10 meeting after a first hike in June. ECB chief Christine Lagarde warned in July that the energy shock from the conflict “could intensify further”.

Leo Barincou of Oxford Economics said inflation should remain well above target into next year as higher gas and food prices add pressure. Kamil Kovar of Moody's Analytics said the ECB would raise rates next week, while the question of another increase in December remained open.

Eurozone inflation was last above 3.3 percent in September 2023, when it stood at 4.3 percent. It had peaked at 10.6 percent in October 2022 after energy prices rose following Russia's invasion of Ukraine.