Eurozone Inflation Rises to 2.1 Percent August

Eurozone inflation rose slightly to 2.1% in August from 2.0% in July, exceeding market expectations and remaining close to the European Central Bank's 2% target. This increase was driven by higher prices for unprocessed food and a smaller decline in energy costs, while the core inflation rate, which excludes volatile food and fuel prices, remained steady at 2.3%, above the anticipated 2.2%. The ECB projects inflation to hover around its target through the rest of the year, balancing moderating energy prices against strong food and service price growth. Market expectations currently favor steady interest rates for the remainder of 2025, although policymakers may debate further easing in early 2026 due to concerns over inflation potentially falling below target temporarily. ECB board member Isabel Schnabel warned that risks to inflation are skewed upwards amid healthy economic growth and trade-related cost pressures, noting that moderate deviations from the 2% target are unavoidable. Other policymakers remain cautious about the inflation outlook, reflecting ongoing uncertainty in the economic environment.