Eurozone Inflation Rises Only Modestly In July

By Bert Colijn of ING Think

Economic and Financial Analysis • Aug 1, 2026 at 6:59 AM EDT

Eurozone inflation rose to 2.9% in July as energy prices climbed, signaling potential upward pressure for August.

Despite the flare-up in the Middle East conflict and rising energy prices, eurozone inflation only ticked up from 2.8% to 2.9% in July. But consumer prices are not immune to current developments and inflation continues to face upward pressure.

Source

Fuel prices climbed sharply in July, lifting average pump prices across the eurozone to their highest level since the Middle East conflict began. Because July started while the US-Iran memorandum of understanding was still in place, the effect on this month's inflation figures was relatively modest, but August inflation will be significantly higher if oil prices remain around their current levels.

While energy inflation is on the move again, the question remains when second round effects will show up in core inflation data. The increase from 2.4% to 2.5% in core inflation in July was small, but does reflect both goods and services inflation trending slightly higher.

We do expect goods inflation to still rise from the current inflation rate of 0.9% (an increase from 0.8% in June), but so far there has not been much movement. While businesses continue to indicate caution in increasing selling prices, the months ahead should bring more pass-through of higher input costs.

And in the labour market, the ECB's own wage tracker noted a small tick-up in its expectations of negotiated wage developments for the start of next year. Nothing big, but perhaps a first sign of an impact of the modestly higher inflation rate on wage growth. The labour market is softer than a few years ago and wage growth is still higher than inflation for now, but the ECB will be attentive to the labour market effects for sure.

So, while the data for July was quite benign, there is still plenty of scope for a further increase in inflation. Especially since the Middle East war remains very unpredictable. The ECB remains on high alert and is likely to raise rates in September again under current conditions.

Disclaimer:

This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice. The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions. Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.

STOCKS IN THIS ARTICLE

Also Mentions:

Comments

Back to all articles