Eurozone inflation holds steady at 2% in July

Inflation in the Eurozone held steady at the European Central Bank’s 2% target in July, slightly above the 1.9% forecast, reinforcing the ECB’s more dovish outlook on price pressures.

The stable reading supports the central bank’s current approach of keeping interest rates unchanged, following a series of cuts over the past year that brought the key rate down to 2%.

Policymakers expect inflation to remain close to the target in the medium term, and believe that heightened uncertainty over U.S. trade tariffs and ongoing geopolitical tensions are unlikely to significantly disrupt inflation dynamics.

Core inflation, which strips out volatile components such as food and energy, was also unchanged at 2.3% in July, aligning with market expectations.

The recent trade agreement between the EU and the U.S., which helped avert a broader trade conflict, has further reduced pressure on the ECB to adopt additional monetary easing measures to support growth in the bloc.

A weaker euro and modest—but still positive—GDP growth in the second quarter also support the case for a pause in rate adjustments. As a result, market expectations for another ECB rate cut before year-end have dropped below 50% following the trade deal with President Trump.