Euro zone inflation falls to 2.2
September rate cut seen as 39;foregone conclusion39;
Services get Olympics boost

FRANKFURTTALLINN, Aug 30 Reuters Inflation in the euro zone fell to its lowest level in three years in August, setting the stage for a further cut in the European Central Bank39;s interest rates next month despite an Olympicsdriven surge in the price of services.

The ECB has started winding down a twoyear campaign against high inflation that followed the brisk reopening of the economy after the COVID19 pandemic and Russia39;s invasion of Ukraine.

Inflation in the 20 countries sharing the euro currency fell to 2.2 this month, the slowest pace since July 2021 and closing in on the ECB39;s 2 target, according to a flash reading by the European Union statistics office, Eurostat.

While the fall was mostly driven by lower energy prices and may even reverse later this year, it was still likely to seal the deal on a second ECB rate cut on Sept 12 after a first move in June.

The significant drop in headline inflation in August makes the September cut a foregone conclusion, said Tomas Dvorak, a senior economist at Oxford Economics.

Even ECB board member and prominent policy 39;hawk39; Isabel Schnabel appeared to open the door to more easing on Friday, saying further gradual rate cuts might not derail the disinflation process as some policymakers had feared.

Still, the report showed price growth in the services sector which is closely watched by policymakers…