Consumer inflation in the eurozone held steady at the European Central Bank’s (ECB) 2% target in July, offering little urgency for further policy easing after the central bank officially ended its rate-cutting cycle last month. The headline Consumer Price Index (CPI) rose by 2.0% year-on-year, slightly above the expected 1.9%, while monthly inflation came in flat at 0.0%, compared to June’s 0.3% increase. Core inflation, which excludes volatile items like food and fuel, was unchanged at 2.3% annually, mirroring the previous month’s figure.

Country-level data showed a mixed inflation landscape. Germany saw inflation ease to 1.8%, Italy to 1.7%, while France remained steady at 0.9%. However, Spain saw a notable uptick to 2.7% from 2.3%, suggesting localized price pressures. The broader picture, however, points to a successful unwinding of post-pandemic and geopolitical inflation drivers, such as supply chain disruptions and energy shocks linked to the Ukraine war.

The ECB, which has delivered eight rate cuts since June 2024, maintained its policy rate at 2% in July and expressed cautious optimism about the region’s economic resilience. However, fresh headwinds may emerge, with the U.S. now imposing a 15% tariff on most European exports — the steepest since the 1930s. This trade friction, combined with persistent economic uncertainty, has led markets to price in less than a 50% chance of further rate cuts this year, with a potential rate hike now expected only in late 2026.