Eurozone inflation jumps to new record 9.1pc

The eurozone inflation rate hit a new record in August, official data showed on Wednesday, increasing pressure on the European Central Bank to hike rates to tame Ukraine war-fuelled prices.

Driven by soaring energy prices caused by Russia's invasion in Ukraine, the yearly inflation rate in the 19-country single currency area reached 9.1 per cent, its highest since records began, according to Eurostat.

Consumer prices had accelerated to 8.9 percent in July.

The president of Germany's powerful federal central bank, Joachim Nagel, immediately declared that the ECB should plan for a  "strong rise in interest rates for September".

"Otherwise, inflation expectations could become permanently entrenched above our target of two percent," he warned.

The headline rate has been rising since November 2021, amid global supply chain stresses. War erupted in Ukraine in February and the European summer was marked by a drought that helped force up food prices.

The ECB is expected to raise interest rates at its next meeting on September 8, after first increasing them in July for the first time in a decade. Rates had been kept low as Europe emerged from its coronavirus slump.

France, which has moved to cap energy prices saw the lowest rate within the eurozone, with 6.5 per cent in August, according to Eurostat.

But powerhouse Germany was high on 8.8 per cent, Italy saw nine per cent and Spain 10.3.

Russia's neighbours on the Baltic, Estonia, Lithuania and Latvia suffered the most, at 25.2 per cent, 21.1 and 20.8 respectively.

Economist Jack Allen-Reynolds of Capital Economics warned that the eurozone inflation rate could hit 10 percent by the end of the year, even if the bank hikes rates.

"The balance of probabilities is shifting towards a 75 basis points hike next week," he said. The ECB raised rates by 50 basis points in July, from a zero interest rate to 0.5 per cent.

For Bert Colijn, a senior economist at the bank ING, the increase in the price of goods contained within the broader inflation rate should worry observers as much as the hikes in energy.