Eurozone inflation rises to 2.9% as energy costs drive price gains
Consumer price growth in the eurozone accelerated to 2.9 percent in July, complicating the European Central Bank's path as surging energy costs threaten the bloc's economic resilience.
Consumer prices across the eurozone rose by 2.9 percent in July, ending a brief slowdown and matching economist forecasts. The acceleration follows a 2.8 percent reading in June and comes just a day after data showed the regional economy grew faster than expected in the second quarter.
Energy costs drove the broader increase, jumping 10 percent year-on-year as renewed conflict in the Middle East pushed up commodity markets. Core inflation, which excludes volatile food and energy, also edged higher to 2.5 percent, while service prices climbed 3.3 percent.
The persistence of price pressures is shaping expectations for monetary policy. Pantheon Economics economist Claus Vistesen stated, "We think headline inflation will remain sticky at just above 2.5% for the Eurozone," leading his firm to forecast one final 25-basis-point rate hike before a pause.
Underneath the aggregate data, inflation trends fractured across member states. Lithuania recorded the highest annual rate at 5.6 percent, followed by Bulgaria at 4.1 percent and Cyprus at 4.0 percent, while Estonia posted the lowest at 2.0 percent.
Month-on-month changes were equally divergent. The Netherlands saw consumer prices jump 1.5 percent from June, and Germany posted a 0.9 percent increase, whereas prices actually fell in Greece, Italy and Belgium.
This heavy reliance on imported energy leaves the region vulnerable to external shocks. Matthew Ryan, head of market strategy at Ebury, warned that "the ongoing conflict and a spike in energy costs remain key risks to growth."
He noted that while oil prices have retreated slightly from their peaks, they remain elevated. Furthermore, natural gas prices have surged to multi-year highs, adding to broader economic concerns.
Despite the inflation data, financial markets maintained a strong risk appetite. The euro strengthened to 1.1520 against the US dollar, while the DAX 40 climbed 0.8 percent to a record high above 25,800 and the Euro Stoxx 50 gained more than 1 percent to an all-time peak.
Technology stocks and strong corporate earnings led the equity advance. Infineon Technologies surged more than 6 percent and STMicroelectronics gained over 4 percent, while NatWest advanced on a 29 percent jump in pre-tax profit.
