German inflation climbed to 2.9% in August, undershooting the 3.1% forecast, as energy costs tied to the Iran war kept rising. European Central Bank policymakers are ready to raise interest rates at their September meeting to offset the conflict's economic fallout.
German inflation undershoots forecasts
Germany's annual inflation rate rose to 2.9% in August from 2.8% in July, according to preliminary data from the federal statistics office released Monday. Analysts polled by Reuters had forecast the EU-harmonized consumer price index to reach 3.1%, so the actual reading came in below expectations.
Energy prices drove the increase. Energy inflation climbed to 10.5% in August from 8.3% in July, as the war in Iran continued pushing up energy and raw material costs in previous months. Core inflation, which excludes volatile food and energy prices, remained unchanged from the previous month at 2.4%.
ECB signals a September rate hike
European Central Bank policymakers are ready to raise interest rates at their next meeting in September to contain the side-effects of the Iran war, sources told Reuters. However, those sources added that policymakers have little appetite to signal further tightening after that meeting.
The planned rate hike comes as traders also watch the broader eurozone inflation print due the next day.
Eurozone data awaited Tuesday
The German report precedes the eurozone inflation release scheduled for Tuesday. Economists expect inflation across the bloc to reach 3.3% in August, up from 2.9% in July, according to economists polled by Reuters.
Berlin's government now expects inflation to accelerate to 2.7% this year and 2.8% in 2027.
Source: Investing.com
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