Euro area inflation climbed to 2.9% in July, reinforcing expectations for a 25-basis-point ECB rate increase next month.
Euro area inflation accelerated to 2.9% year-over-year in July, matching market expectations but up from 2.8% in June. Core inflation held at 2.5%, while services inflation rose to 3.3%, signaling persistent price pressures with limited second-round effects.
Markets continue to price a 25-basis-point European Central Bank rate hike in September, aligning with strategists’ base case. Prior prints showed inflation easing, but July’s uptick suggests underlying trends may delay a pivot to cuts.
A durable resolution to Middle East tensions could shift the outlook, though no material changes are expected absent such developments.