Inflation in the euro area picked up to 3.3% in August, powered mainly by energy costs, with energy prices up 14.3% year over year, while core inflation edged down slightly to 2.4% as energy and food were excluded.

Markets are pricing in another 25 basis point ECB rate hike at the September meeting, lifting the deposit rate to 2.5%, with possible further tightening depending on incoming data.

External pressures, including the Iran conflict and higher natural gas prices, are expected to keep inflation pressures elevated and may shape the ECB’s stance and timing of future meetings.

Analysts warn that higher borrowing costs could strain heavily indebted households, weaken housing markets, and raise the cost of capital for businesses, potentially delaying SME investment.

Savers are advised to actively compare rates and move funds to higher-yield Tagesgeld or lock in rates with Festgeld to protect against erosion of real value.

UBS notes potential value in flattening yield curve structures if oil prices stabilize.

In the U.S., a crisis of confidence surrounds fiscal policy and debt strategy, with deficits pushing the national debt beyond 40 trillion dollars.

The piece casts a critical view on anti-inflation efforts, suggesting that price pressures are not being decisively tackled.

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Data suggest limited second-round effects from energy costs, offering reassurance that aggressive tightening may not be necessary.

Analysts say later contagion would depend on energy supply, wholesale costs, and monetary policy responses.

UBS argues the rise in long-term euro area yields reflects changing expectations for future real rates more than higher debt compensation.