Markets overview. Eurozone inflation remained at ECB’s target in July; CPI rose 2.0% annually – ForexNews.PRO
In July, the eurozone’s consumer price inflation held steady at the European Central Bank’s (ECB) 2% target. This figure, slightly exceeding expectations, lessened the immediate need for policymakers to further lower interest rates, especially after the ECB concluded its easing measures in the previous month.
The Consumer Price Index (CPI) experienced an annual increase of 2.0% last month, mirroring June’s rate but marginally surpassing the anticipated 1.9% rise. On a month-over-month basis, the CPI remained unchanged at 0.0% in July, following a 0.3% increase in the preceding month.
Excluding volatile components like food and energy, the core inflation rate remained constant at 2.3% for the twelve months leading up to June, matching the previous month’s level.
Major eurozone economies exhibited generally contained inflation, suggesting that the surge in prices stemming from post-pandemic demand, supply chain issues, and the Russia-Ukraine conflict has largely subsided.
Specifically, Germany’s inflation rate declined to 1.8% in July from 2.0%, while Italy’s decreased to 1.7% from 1.8%. France maintained a stable rate of 0.9%, whereas Spain experienced an increase to 2.7% from 2.3%.
The ECB forecasts a period of slightly below-target inflation for the next 18 months, with price growth expected to return to the 2% mark in 2027.
During the prior week, the eurozone’s central bank maintained interest rates at 2% after implementing eight policy rate cuts since June 2024. The ECB offered a cautiously optimistic view of the eurozone economy, which led to investor doubts concerning further policy easing, particularly given the uncertain effects of U.S. tariffs on EU imports.
The United States is set to impose a 15% tariff on the majority of European exports, as part of a recently announced agreement. While this is reduced from previous, higher proposed rates, it remains the highest tariff level since the 1930s.
Current market assessments indicate a less than 50% likelihood of additional rate reductions this year and have begun to factor in a potential rate hike toward the end of 2026.
