Eurozone Inflation Climbs to 2.9%

Eurozone inflation edged higher in July, with rising energy prices keeping overall price pressures well above the European Central Bank's target. Annual inflation increased to 2.9%, up from 2.8% in June, in line with market expectations but still significantly above the ECB's 2% goal.

Energy Drives Price Growth

The increase was largely driven by energy costs, with energy inflation accelerating to 10.0% from 8.5% a month earlier. Higher fuel prices and supply concerns linked to renewed US-Iran tensions contributed to the stronger reading.

Underlying inflation also showed signs of strengthening. Core inflation rose to 2.5%, while services inflation reached 3.3%. Prices for non-energy industrial goods also increased at a faster pace, suggesting inflationary pressures remained broad-based.

In contrast, inflation for food, alcohol, and tobacco eased to 1.2% from 1.5%, providing only limited relief against rising energy and service costs.

ECB Outlook Remains in Focus

Among the bloc's largest economies, inflation accelerated in Germany, France, Spain, and the Netherlands, while Italy recorded a slight slowdown. The latest figures are likely to reinforce expectations that the European Central Bank will maintain a restrictive monetary policy. If inflation remains elevated in the coming months, markets may increasingly price in the possibility of another interest rate increase.