Euro Area: Harmonized inflation holds stable in July
Latest reading: Harmonized inflation came in at 2.0% in July, matching June’s result and the ECB target. Looking at the details of the release, prices for food, alcohol and tobacco rose at a quicker rate in July, while energy prices dropped at a slower pace. That said, price pressures for services eased in June.
Annual average harmonized inflation fell to 2.1% in July (June: 2.2%). Meanwhile, core inflation was stable, coming in at June’s 2.3% in July.
Finally, harmonized consumer prices were flat in July over the previous month, which was below June’s 0.31% increase.
Outlook: Our Consensus is for inflation to remain around target throughout the remainder of 2025, tamed by muted oil prices.
Panelist insight: Nomura analysts commented on implications for monetary policy:
“In short, we don’t think the slowing in services inflation/price momentum in recent months will be sufficient to generate further rate cuts from the ECB – we recently changed our view to no more cuts (i.e. policy sticking at the 2% depo rate). Moreover, we think GDP growth will improve later this year, from its 0.1% q-o-q pace in Q2 to 0.2?% in Q3, which is stronger than the ECB’s negative view for Q3, also supporting the case for no further monetary easing.”