Eurozone inflation accelerated to 2.9% in July from 2.8% the previous month, driven by a sharp jump in energy costs that complicates the European Central Bank's next policy move. Energy prices rose 10% year-on-year, up from an 8.5% increase in June, while services inflation held at 3.3%. Core inflation, which strips out volatile components, edged up to 2.5% from 2.4%.
The pickup comes after the ECB held interest rates steady at its July meeting, following a quarter-point increase in June. Financial markets are now pricing in more than two additional rate hikes, with moves fully discounted by October and April. Commerzbank Chief Economist Jörg Krämer expects the ECB to raise rates again in September.
Inflation varied widely across the bloc. Lithuania recorded the highest rate at 5.6%, while Estonia posted the lowest at 2.0%. Among major economies, Spain's rate reached 3.8%, whereas Germany and France posted 2.8% and 2.4% respectively. The eurozone economy grew 0.4% in the second quarter.