Eurozone preliminary August CPI records 3.3% y/y as expected, core dips to 2.4%

• Eurozone's August preliminary consumer price index rose 3.3% year-on-year, matching the forecast of 3.3%.
• The previous reading was 2.9%.
• Core inflation, excluding energy, food, alcohol and tobacco, increased 2.4% year-on-year, below the 2.5% expected.
• In July, core inflation stood at 2.5%.

There were no surprises, as the headline annual rate climbed back above 3% for the first time since May. The increase was largely due to a surge in energy price inflation, which hit 14.3% in August, up sharply from 10.3% in July.

On a monthly basis, energy prices jumped 2.9%, pushing up the headline index by 0.4% in August. Services inflation edged up 0.1% month-on-month, while food price inflation was flat.

The only unexpected figure was core annual inflation easing a bit more to 2.4%. This matches the lowest level since June but is still slightly higher than at the start of the US-Iran conflict. The decline came mainly from services inflation, which fell to 3.0% from 3.3% previously. Food price inflation remained steady at 1.2%, unchanged from July.

Overall, the report underscores the need for the ECB to carefully position itself in the battle against inflation, with potential risks of second-round effects. A September rate hike seems justified, but policymakers need not rush into the next move.