Brussels, Aug 30 (IANS): The Eurozone's annual inflation rate fell to 2.2 per cent in August, down from 2.6 per cent in July, marking its lowest point since July 2021, according to a flash estimate published by Eurostat on Friday.

The main driver of inflation remains the price of services, which saw a year-on-year growth of 4.2 per cent in August, up from 4 per cent in July, according to the European Union's (EU) statistical office, Xinhua news agency reported.

Food, alcohol, and tobacco prices registered an annual inflation rate of 2.4 per cent, slightly higher than July's 2.3 per cent.

Non-energy industrial goods saw a decrease in inflation, from 0.7 per cent in July to 0.4 per cent in August. Meanwhile, energy prices recorded a negative growth in August, falling by 3 per cent, compared to a 1.2 per cent increase in July.

Among EU member states, Belgium had the highest year-on-year inflation rate at 4.5 per cent, down from 5.4 per cent the previous month. Estonia and the Netherlands also registered high inflation rates at 3.4 per cent and 3.3 per cent, in respective.

Conversely, Lithuania saw the lowest inflation rate at 0.7 per cent, down from 1.1 per cent in July, followed by Latvia at 0.9 per cent, up from 0.8 per cent in the previous month. Ireland, Slovenia, and Finland recorded inflation rates of 1.1 per cent, compared to 1.5 per cent, 1.4 per cent, and 0.5 per cent in July, respectively.

Among the major economies, Germany's inflation rate stood at 2 percent in August, down from 2.6 percent the previous month; France's consumer price index (CPI) was at 2.2 percent, down from 2.7 percent; and Spain's CPI at 2.4 percent, down from 2.9 percent in July.

Bert Colijn, a senior analyst at ING, noted that the drop in Eurozone inflation was largely driven by falling energy prices, indicating a slowly improving inflation environment. However, he said it's important to focus on core inflation indexes, as energy prices tend to be volatile.

Core inflation dropped slightly from 2.9 per cent in July to 2.8 per cent in August. Colijn attributed the persistently high price of services, especially in the context of the Paris Olympic Games, to this slight decrease in core inflation. "Overall, we expect a continued deceleration but don't expect core inflation to drop below 2.5 per cent for the rest of the year," he said.

Colijn foresees a possible rate cut of 25 basis points by the European Central Bank (ECB) in September as part of a slow and gradual process of easing economic constraints.

The ECB left interest rates unchanged at its meeting last month after reducing rates by 25 basis points in June, the first cut since September 2019.