Euro zone inflation holds at 2%, backing ECB caution on rates
Consumer prices rose an annual 2 per cent in July, the same pace as in the previous month, Eurostat said Friday.
In Ireland, prices rose by an estimated 1.6 per cent, according to the Eurostat measure. That was the same pace of inflation as in June and marginally up on a year earlier.
Economists polled by Bloomberg had expected a slowdown to 1.9 per cent in euro area inflation.
The figures on Friday were a flash estimate, with the July data set to be confirmed on August 20th.
A core measure stripping out volatile energy and food costs increased 2.3 per cent on the year, while closely-watched services inflation was the weakest since early 2022.
The report underscores how the price shock that started during the pandemic is continuing to fade.
The ECB is confident that inflation has been largely tamed, and cut rates eight times in the span of a year to the point where they are judged to neither restrict nor stimulate growth.
With inflation hovering around its goal and the economy so far holding up to the US tariff push, many officials have signalled they don't see strong grounds to continue the ECB's easing campaign.
Investors also see less than a 50 per cent chance for another move this year.
'We have reached a point in our easing cycle where we can wait and see whether the data and evidence indicates the need for a change in our monetary policy stance,' Central Bank of Ireland governor Gabriel Makhlouf said this week.
Mixed national reports aren't likely to change that view. While German price growth slowed more strongly than anticipated last month, numbers from France, Italy and Spain came in slightly higher than expected.
US President Donald Trump's trade policy has long been the key question mark for the economic outlook.
But his recent agreement with the European Union – which foresees 15 per cent duties on most imports from the bloc – removed the risk of near-term escalation while providing some more clarity to companies.
Euro area growth slowed in the second quarter, after higher activity at the start of the year, when firms rushed to get ahead of Trump's April tariff announcements.
Output still grew 0.1 per cent in the three months through June, and some economists pointed to evidence of recovering domestic demand.
While the ECB predicts that inflation will start undershooting its goal this quarter, officials are confident that it will return to 2 per cent in 2027 as higher government spending on infrastructure and defence supports the economy.
Bank of France Governor Francois Villeroy de Galhau has still urged colleagues to remain 'completely open' on the next steps, warning that a strengthening euro could have disinflationary effects.
The euro, which climbed above $1.18 at the start of last month has lost more than 3 per cent since then and stood around $1.14 before the publication of the inflation data. – Bloomberg
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