Eurozone inflation rose to 2.1% in August, the first time it has breached the ECB's 2% target since April, driven by a 3.2% rise in food, alcohol and tobacco prices. This uptick has likely pushed back expectations of a December rate cut, with the ECB now expected to keep interest rates on hold for the remainder of the year. Core inflation remained steady at 2.3%, while services inflation, closely watched by the ECB, eased to 3.1%, its lowest since March 2022. Policymakers remain divided: some see inflation risks as contained due to cheaper energy and a stronger euro, while others warn that global trade tariffs could add upward pressure. Markets reacted calmly, with the euro little changed and swaps traders maintaining a 50 50 chance of a rate cut by March 2026. The ECB's next meeting on 11 September is widely expected to confirm its wait and see approach. Bond and equity markets showed no major moves, reflecting confidence in a steady near term outlook.