Energy did nearly all of it. Prices across the twenty-one countries using the euro rose 3.3% in the year to August, up from 2.9% in July, and the fastest pace since the autumn of 2023 — but strip out fuel and power and the picture is calmer, not hotter.
Eurostat’s flash estimate, published Tuesday, shows energy costs up 14.3% from a year earlier, a sharp acceleration from 10.3% in July. Everything else moved the other way or barely moved at all. Core inflation, which leaves out energy, food, alcohol and tobacco, actually slipped to 2.4% from 2.5%. Services inflation eased to 3.0% from 3.3%. Food, alcohol and tobacco held at 1.2%. Goods ticked up to 1.2% from 0.9%.
In plain terms: a European household’s grocery bill and restaurant tab are rising at roughly the same rate they were a month ago. The electricity bill and the fuel tank are what changed, and they changed enough to drag the whole index more than a third of a percentage point higher in a single month.
The source of that energy squeeze is the war in the Middle East and the disruption to oil and gas moving out of the Gulf, which has kept European energy prices well above their pre-conflict levels since spring.
That puts the European Central Bank in an uncomfortable position when its Governing Council meets in Frankfurt on Sept. 10. The bank raised rates by a quarter point in June, citing the war’s inflationary pressure, then held steady in July while it waited for data. Christine Lagarde said afterward that some council members had asked whether to move immediately. Markets are now positioned for an increase next week, which would take the deposit rate to 2.50%.
The argument against moving is straightforward: a central bank cannot manufacture oil, and raising the cost of borrowing does nothing to lower the price of imported gas. The argument for moving is that an energy shock that lasts long enough stops being a one-off and starts working its way into wages, transport costs and shelf prices across the economy — the second-round effects the ECB has said it is watching closely. Its own staff projections put headline inflation averaging 3.0% this year before falling back toward 2.0% by 2028.
September is also a projections meeting, meaning the council will publish fresh forecasts alongside whatever it decides. For American businesses selling into Europe, a hike would likely firm the euro against the dollar and make U.S. goods more expensive on European shelves, while European borrowers face costlier credit into the fourth quarter.
JBizNews Desk | Frankfurt
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