Eurozone households are forecast to see higher energy bills (Image: HarryDaniels)

- Fuel costs set to push CPI higher
- Core inflation offers a glimmer of relief
- Energy pressures build across the bloc
- September ECB hike moves into view

By Harry Daniels
LiveSquawk News
@HarryDaniels71

16:00 GMT | 31 August 2026

The preliminary estimate of eurozone consumer-price inflation is expected to show that the headline rate accelerated in August, driven largely by higher fuel costs. It will be the final inflation release before the European Central Bank’s 9–10 September policy meeting.

A poll of economists forecast that annual headline inflation rose to 3.3% from 2.9% in July. More encouragingly, the less volatile core rate is expected to remain unchanged at 2.5%.

Oil prices are around 1% higher than they were at the end of last month and are expected to have been the main catalyst for the renewed acceleration in headline inflation. That modest net rise, however, masks considerable volatility during the period as the US and Iran exchanged threats—and, more recently, missiles.

Energy was also the main reason headline inflation increased in July. Its annual rate accelerated to 10.3% from 8.5% in June, contributing 0.94 percentage point to the overall inflation rate.

On Monday, Germany reported that both headline HICP and national CPI inflation edged up by 0.1 percentage point in August, to 2.9% year on year. The readings nevertheless undershot forecasts of 3.0% and 3.1%, respectively. France and Spain also reported increases in their annual HICP inflation rates on Friday, attributing much of the rise to higher energy prices, particularly motor fuels.

Barclays economist Silvia Ardagna argued that, with headline inflation set to rise sharply this month, the ECB’s communications remained consistent with a further rate increase in September and a vigilant stance thereafter.

“Q2 GDP breakdowns for France and Germany show that euro area growth was driven mainly by external demand, while domestic demand remained subdued,” Ardagna noted. She also highlighted that August surveys pointed to improving momentum, led by manufacturing and Germany.

The account of the ECB’s July meeting provided the clearest signal yet that another increase was in prospect. Recent remarks from senior officials have reinforced that message.

ECB Executive Board member Isabel Schnabel said that further tightening would be necessary because the current policy rate was unlikely to bring inflation back to target over the medium term. She argued that strong demand and increasingly persistent energy pressures had raised the risk of second-round effects.

“With the current interest rate, it is unlikely that inflation will return to the target in the medium term, and therefore further tightening will be necessary,” the prominent policy hawk cautioned.

Olli Rehn, governor of the Bank of Finland, and Mārtiņš Kazāks, governor of the Bank of Latvia, have also stressed that the ECB has both the capacity and the willingness to respond if the energy shock threatens medium-term inflation.

Nomura's Andrzej Szczepaniak said his bank maintains its view that the ECB will raise rates by 25 basis points at its 10 September meeting to 2.50%. "In the near term, market pricing for the ECB by December 2026 is driven largely by the price of Brent crude oil, as we continue to focus on US-Iran headlines. However, there are clear risks that a December rate hike could occur should the price of Dutch TTF natural gas rise further."