Eurozone Inflation Rises to 2.9% in July, Keeping an ECB Hike in Play

Annual inflation in the eurozone accelerated to 2.9% in July, up from 2.8% in June, according to Eurostat's flash estimate released on July 31, as a renewed surge in energy costs tied to the conflict in the Middle East pushed prices higher. Energy recorded the sharpest annual jump at about 10%, while services inflation edged up to 3.3% and core inflation, which strips out food and energy, rose to 2.5%. Among the bloc's largest economies, inflation accelerated in Germany to 2.8%, while France recorded one of the lowest rates at around 2.0%. The data followed figures a day earlier showing the euro area economy grew a better-than-expected 0.4% in the second quarter, underscoring its resilience despite the energy shock. The European Central Bank left its key rate unchanged at 2.25% at its most recent meeting after a June increase, but signalled the door was open to a further move. Markets are now pricing in a high probability that the ECB raises rates again in September.