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Eurozone July inflation rises to 2.9% as energy costs remain elevated

2026-08-01·newswire-us-stock-200001
Eurozone July inflation rises to 2.9% as energy costs remain elevated.

Eurostat said Friday that annual consumer-price inflation in the euro area’s 21 countries rose to 2.9% in July from 2.8% in June. The reading was slightly above the 2.8% rate broadly expected by economists surveyed by the media. Energy inflation, which cooled in June as tensions in the Persian Gulf eased, rose to 10% in July from 8.5%.

Oil prices climbed for much of the month after hostilities between the United States and Iran resumed, although prices fell last week. The increase in energy inflation may also have reflected the expiration of a German fuel-tax reduction plan at the start of the month.

There are also signs that the sharp rise in oil and natural-gas costs since the outbreak of the war with Iran may be pushing up prices in other parts of the economy. Services inflation rose to 3.3% from 3.2%, while core inflation edged up to 2.5% from 2.4%.

Vincent Stamer, a senior economist at Commerzbank, said in a report to clients: “This could mark the beginning of a rise in core inflation ...

The longer the conflict in the Middle East lasts, and the longer it disrupts the transport of oil and oil products, the more companies will pass on higher energy costs.” These factors pushed inflation further above the European Central Bank’s 2% target, which it has exceeded since March.

The ECB left its key interest rates unchanged earlier this month, and most investors expected it to raise rates again at its next meeting in September.

At the ECB’s July meeting, President Christine Lagarde said the outlook for energy prices was volatile but consistent with the central bank’s baseline projection, even though prices were far above their levels before the war began. “Uncertainty remains very high, and the full impact of the energy shock on inflation has not yet fully emerged,” Lagarde said.

Policymakers may take some comfort from other data showing that the euro-area economy grew 0.4% in the second quarter of this year, faster than expected and even more than U.S. output. The figures suggest that, despite declines in business and consumer confidence, the surge in energy prices has not yet triggered a rapid contraction in domestic demand.

Iain Simmons, an economist at Oxford Economics, said the limited increase in July inflation provided only modest support for a September rate hike.

“However, inflation remains above target, and the upside surprise in GDP suggests that the euro-area economy may be more capable of withstanding the pressure from tighter policy than previously expected,” he added.

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Full text

Eurozone July inflation rises to 2.9% as energy costs remain elevated

Eurostat said Friday that annual consumer-price inflation in the euro area’s 21 countries rose to 2.9% in July from 2.8% in June. The reading was slightly above the 2.8% rate broadly expected by economists surveyed by the media. Energy inflation, which cooled in June as tensions in the Persian Gulf eased, rose to 10% in July from 8.5%. Oil prices climbed for much of the month after hostilities between the United States and Iran resumed, although prices fell last week. The increase in energy inflation may also have reflected the expiration of a German fuel-tax reduction plan at the start of the month. There are also signs that the sharp rise in oil and natural-gas costs since the outbreak of the war with Iran may be pushing up prices in other parts of the economy. Services inflation rose to 3.3% from 3.2%, while core inflation edged up to 2.5% from 2.4%. Vincent Stamer, a senior economist at Commerzbank, said in a report to clients: “This could mark the beginning of a rise in core inflation ... The longer the conflict in the Middle East lasts, and the longer it disrupts the transport of oil and oil products, the more companies will pass on higher energy costs.” These factors pushed inflation further above the European Central Bank’s 2% target, which it has exceeded since March. The ECB left its key interest rates unchanged earlier this month, and most investors expected it to raise rates again at its next meeting in September. At the ECB’s July meeting, President Christine Lagarde said the outlook for energy prices was volatile but consistent with the central bank’s baseline projection, even though prices were far above their levels before the war began. “Uncertainty remains very high, and the full impact of the energy shock on inflation has not yet fully emerged,” Lagarde said. Policymakers may take some comfort from other data showing that the euro-area economy grew 0.4% in the second quarter of this year, faster than expected and even more than U.S. output. The figures suggest that, despite declines in business and consumer confidence, the surge in energy prices has not yet triggered a rapid contraction in domestic demand. Iain Simmons, an economist at Oxford Economics, said the limited increase in July inflation provided only modest support for a September rate hike. “However, inflation remains above target, and the upside surprise in GDP suggests that the euro-area economy may be more capable of withstanding the pressure from tighter policy than previously expected,” he added.

Eurostat said Friday that annual consumer-price inflation in the euro area’s 21 countries rose to 2.9% in July from 2.8% in June. The reading was slightly above the 2.8% rate broadly expected by economists surveyed by the media.

Energy inflation, which cooled in June as tensions in the Persian Gulf eased, rose to 10% in July from 8.5%. Oil prices climbed for much of the month after hostilities between the United States and Iran resumed, although prices fell last week. The increase in energy inflation may also have reflected the expiration of a German fuel-tax reduction plan at the start of the month.

There are also signs that the sharp rise in oil and natural-gas costs since the outbreak of the war with Iran may be pushing up prices in other parts of the economy. Services inflation rose to 3.3% from 3.2%, while core inflation edged up to 2.5% from 2.4%.

Vincent Stamer, a senior economist at Commerzbank, said in a report to clients: “This could mark the beginning of a rise in core inflation ... The longer the conflict in the Middle East lasts, and the longer it disrupts the transport of oil and oil products, the more companies will pass on higher energy costs.”

These factors pushed inflation further above the European Central Bank’s 2% target, which it has exceeded since March. The ECB left its key interest rates unchanged earlier this month, and most investors expected it to raise rates again at its next meeting in September.

At the ECB’s July meeting, President Christine Lagarde said the outlook for energy prices was volatile but consistent with the central bank’s baseline projection, even though prices were far above their levels before the war began.

“Uncertainty remains very high, and the full impact of the energy shock on inflation has not yet fully emerged,” Lagarde said.

Policymakers may take some comfort from other data showing that the euro-area economy grew 0.4% in the second quarter of this year, faster than expected and even more than U.S. output. The figures suggest that, despite declines in business and consumer confidence, the surge in energy prices has not yet triggered a rapid contraction in domestic demand.

Iain Simmons, an economist at Oxford Economics, said the limited increase in July inflation provided only modest support for a September rate hike.

“However, inflation remains above target, and the upside surprise in GDP suggests that the euro-area economy may be more capable of withstanding the pressure from tighter policy than previously expected,” he added.

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