Eurozone August inflation 2.1%↑…September rate hold seen certain

Headline inflation higher than expected, core inflation unchanged from the previous month

The eurozone's inflation rate for August rose by 2.1%, exceeding expectations.

On the 2nd (local time), Eurostat, the statistical agency of the European Union (EU), announced that the inflation rate for August rose by 2.1%. Economists had expected it to remain at 2%, the same as in July.

Core inflation, which excludes volatile food, energy, alcohol and tobacco prices, stood at 2.3%, unchanged from 2.3% in July. Service-sector inflation was 3.1% in August, slightly down from 3.2% in July.

On the day, the euro fell 0.6% against the dollar to 1.1640 dollars. The pan-European STOXX 600 index fell 0.7% that morning.

According to a Reuters survey, the majority of economists expect the European Central Bank (ECB) to have kept the policy rate at 2% in July and to keep the policy rate unchanged at the September meeting.

Although the EU-US trade agreement concluded at the end of July removed uncertainty over tariffs, concerns remain that a blanket 15% tariff on EU exports to the US could still weigh on economic activity.

According to data Eurostat released at the end of July, the eurozone recorded 0.1% quarter-on-quarter growth in Q2.

Andrew Kenningham, chief European economist at Capital Economics, said, "Despite August's headline inflation, it is certain that the ECB will, as expected, hold rates at the next meeting." He said, "I expect the ECB to keep rates unchanged for the coming months."

He added, "The ECB will note that services inflation dipped slightly from 3.2% in July to 3.1% in August." He predicted that if the labor market slows in the coming months, services inflation will fall further.

Jeong-a Kim, guest reporter kja@hankyung.com