Eurozone Inflation Rises to 3.3% in August

That split matters for policymakers because it leaves the ECB facing higher headline inflation without evidence of a wage-price spiral. Services inflation slowed to 3.0% from 3.3%, another sign that domestic demand is not overheating. Joachim Nagel, who heads Germany’s Bundesbank, said there were no signs yet of second-round effects in core inflation and that the outlook for rates next week was “relatively predictable,” echoing market pricing for a 25-basis-point move.

For investors, the data reinforce the view that the ECB can keep tightening without having to signal a much more aggressive path. Markets have already fully priced in a quarter-point increase at the Sept. 10 meeting, which would lift the deposit rate to 2.50% and mark the second hike this year after June. A softer labor backdrop also gives officials room to move cautiously: eurozone unemployment was unchanged at 6.4% in July, while the EU rate held at 6.1%.

The message for bond traders and currency investors is that inflation remains too hot for comfort, but not hot enough to force a sharper policy response unless energy costs keep rising or wage growth accelerates. Euro-area inflation will be revised on Sept. 17, and the ECB meeting next week will be watched for any hint that officials see August’s energy shock as temporary rather than the start of a broader inflation rebound.