Eurozone inflation stagnates

Eurozone inflation remained unchanged in August, official data showed Thursday, leaving the European Central Bank faced with a conundrum over whether to continue hiking interest rates amid fears of a deepening economic downturn.

The ECB has hiked interest rates to their highest level since May 2001 to tame red-hot inflation, but its president Christine Lagarde has suggested there could be a pause at the next rate-setting meeting on September 14.

Analysts don't agree on what the ECB will do. Some avoided making a prediction that the data would not dramatically change the ECB's trajectory, but others said they still expect a hike.

Consumer prices reached 5.3 percent in August after a smaller drop in energy prices and despite a slowdown in the rise of food and drinks costs, the EU's statistics agency said.

A consensus forecast by analysts compiled by FactSet and Bloomberg had predicted a slight drop in consumer prices to 5.1 percent.

The figure is far higher than the ECB's two-percent target.

"The small upside surprise to euro-zone headline inflation in August was entirely due to energy, while the core rate edged down. We don't think these data will tip the balance of opinion at the ECB decisively towards a hike or a hold at the meeting," said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.