Inflation in the eurozone is expected to reach 3.3 percent year on year in August. That would be the highest level since 2023. In July it stood at 2.9 percent, according to a Bloomberg survey of 31 economists.

The main driver is energy - prolonged tensions in the Middle East and higher fuel costs. Germany is forecast at 3.1 percent inflation, its highest since the start of 2024. Italy is expected at around 3.4 percent, the highest level in almost three years. Data from Spain and France have already shown stronger price pressure than expected.

The decision coming on 10 September

The European Central Bank takes a new decision on interest rates on 10 September. Expectations are rising in the markets that the ECB will raise borrowing costs again if inflation keeps drifting away from the two percent target.

One thing gives it room for cautious optimism: core inflation, which strips out volatile energy prices and other unstable categories, is expected to stay around 2.5 percent. So the problem is concentrated in energy rather than spread across the whole economy.

Some ECB officials are already warning that inflationary pressure will not disappear by itself. If price growth stays above the desired level for longer, another rate rise becomes an option - and that means more expensive borrowing for everyone who works on credit in the eurozone.

Germany, where inflation is expected to hit its highest level since the start of 2024, is by a wide margin Macedonia's biggest export destination. According to 2024 data, Macedonian exports to Germany amount to 3.35 billion dollars - almost four times more than the next country on the list. Every ECB decision that slows the German economy also hits the orders arriving at factories here.

Europe's inflation cycle so far has already demonstrated one thing: when energy pushes the rate up, the response through interest rates hits people who have nothing to do with energy at all.