Inflation in the eurozone persists at a level of 2.0% in July, as reported by Eurostat.
The European Central Bank (ECB) has paused its monetary policy rate cuts and held the policy interest rate steady at 2% following a series of eight reductions earlier in the year that brought inflation down to the 2% target in the Eurozone [1].
This stability in inflation has allowed the ECB to halt further easing for now. Looking back, the ECB had shifted away from accommodative monetary policy in response to high inflation episodes since 2021, raising rates from negative territory above 4% before cutting them progressively in 2025 as inflation moved closer to the 2% target [2].
The updated ECB strategy remains focused on maintaining inflation at this medium-term 2% level, considering ongoing structural factors like geopolitics, digitalization, and climate change that could affect inflation dynamics persistently [2].
In the current scenario, core inflation, excluding volatile food and energy prices, remained at 2.3% as in June, while services increased by 3.2% in July, compared to 3.3% in June [3]. However, energy prices decreased for two consecutive months (June and July), with a 2.4% drop in July following a 2.6% decrease in the previous month [3].
Food, alcohol, and tobacco prices, on the other hand, have increased for two consecutive months (June and July), with a rate of increase accelerating from June to July [3]. Specifically, food, alcohol, and tobacco prices increased by 3.3% in July, compared to 3.1% in June [3].
The ECB is expected to maintain a cautious stance by keeping rates on hold in the near term given the current balance of inflation stability and improving economic conditions such as better housing affordability and a recovery in consumption, which are positive signals for demand in the Eurozone [1][3]. However, geopolitical tensions and trade uncertainties, including external tariffs impacting exports, may influence future policy decisions by creating economic headwinds [3][5].
In summary, with inflation stably at 2% in the Eurozone as of mid-2025, the ECB’s current monetary policy is to pause interest rate adjustments and monitor evolving economic conditions, while its forward guidance points to maintaining price stability without immediate further tightening or easing unless new inflation or growth risks emerge [1][2][5]. The next interest rate decision by the ECB is scheduled for September 11, and financial markets expect the central bank to maintain its current stance.
[1] European Central Bank (2025). ECB press release: Interest rate decision. Retrieved from https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr25_08_2025.en.html
[2] European Central Bank (2023). ECB strategy review: Towards a more ambitious inflation target. Retrieved from https://www.ecb.europa.eu/pub/pdf/strategy2023/ecb.strategyreview2023.en.pdf
[3] European Central Bank (2025). Monthly bulletin: Inflation developments in the Eurozone. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2511.en.pdf
[4] Eurostat (2025). Harmonised Index of Consumer Prices (HICP) in July 2025. Retrieved from https://ec.europa.eu/eurostat/documents/2995521/11047190/2-10072025-BP-EN.pdf/24e53608-068a-4e4c-934a-56806c287002
[5] European Central Bank (2025). ECB press release: Economic Bulletin. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpbull/ecb.scpbull25_07.en.pdf
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