Euro zone inflation rises to 3.3%, cementing ECB rate hike expectations

Euro zone inflation accelerated to 3.3% in August, its highest level in nearly three years, driven almost entirely by a surge in energy prices linked to the ongoing conflict in the Middle East. The data, released by Eurostat on Tuesday, September 1, 2026, has cemented expectations for another interest rate hike by the European Central Bank at its upcoming policy meeting. The annual inflation rate rose from 2.9% in July, with the increase propelled by a sharp jump in energy costs. Energy inflation reached 14.3% in August, up from 10.3% in the previous month. This acceleration is tied to turmoil in oil and gas markets caused by the war involving Iran and the disruption of shipping through the strategic Strait of Hormuz. European economies, which rely heavily on imported energy, are particularly vulnerable to such supply shocks. Despite the headline figure, underlying price pressures showed signs of moderation. Core inflation, which excludes volatile energy, food, alcohol, and tobacco, edged down to 2.4% from 2.5% in July. Services inflation, a key metric monitored by the ECB, also eased to 3.0% from 3.3%.