Eurozone core inflation rose to 2.5% in July, exceeding forecasts and raising odds of a September rate hike.
The European Central Bank will base upcoming rate decisions on incoming data to steer inflation back to its 2% target, a policymaker said. Recent geopolitical tensions in the Middle East have heightened uncertainty around energy prices and inflation dynamics, complicating the outlook.
Core inflation in the Eurozone climbed to 2.5% in July, above the 2.4% forecast, reinforcing concerns about persistent price pressures. Markets now price a higher probability of another 25 bps hike at the ECB’s September meeting unless inflation data improves or geopolitical risks ease.
Policymakers emphasized the need for a sustainable return to target inflation, with energy market volatility remaining a key risk factor. The ECB’s next moves will hinge on upcoming economic reports and developments in global energy markets.