Recent inflation data from Germany and Spain shows rising price pressures, and with European Central Bank officials continuing to send hawkish signals, market expectations for a September rate hike are strengthening.

Germany's Federal Statistical Office reported on Thursday that the country's July consumer price index (CPI) rose 2.8% year-on-year, up from 2.4% in June and hitting a three-month high, in line with market forecasts. On the same day, Spain's July inflation rate climbed to 3.8%, exceeding market expectations.

A rebound in energy prices is the main driver of Germany's rising inflation. Data shows that energy prices surged 8.3% year-on-year in July, the largest increase since April. The expiration of fuel subsidy policies and ongoing tensions in the Middle East boosting international oil prices have jointly driven up energy costs.

Market attention is now turning to Friday's release of inflation data for France, Italy, and the broader eurozone. Economists expect the eurozone's overall July inflation rate to rise from 2.7% to 2.9%. If the data meets or exceeds expectations, it will further solidify market pricing for a September ECB rate hike.

Hawkish signals continue to emerge

The ECB held interest rates steady last week but has designated September as a key moment to reassess whether to raise rates. Recently, several officials have reinforced their hawkish stance.

Slovak central bank governor and committee member Peter Kazimir stated that even if Middle East tensions ease, the ECB still needs at least one more rate hike to prevent a "second-round effect" of inflation. Lithuanian central bank governor Gediminas Simkus noted that the likelihood of a rate hike is "far higher" than that of maintaining the current stance.

Meanwhile, Germany's second-quarter economic growth exceeded expectations, and first-quarter data was revised upward, indicating that the economy still has some resilience. This provides the ECB with more room to tighten policy further.

Currently, the market is awaiting the release of eurozone July inflation data to assess whether price pressures are spreading further and to offer clearer policy guidance for the ECB's September meeting.