Eurozone inflation rises to 2.9% as wage growth slows

Eurozone inflation rose to 2.9% in July, up from 2.8% in June, driven by a 10.3% surge in energy prices amid the Middle East crisis, according to Eurostat data Source: La Vanguardia. This remains well above the European Central Bank's (ECB) 2% target, and chief economist Philip Lane expects inflation to hover around 3% for the rest of 2026, though much depends on resolving the Middle East conflict Source: El Español.

Wage growth moderates

Meanwhile, negotiated wage growth in the eurozone slowed to 2.44% year-on-year in Q2 2026, down from 2.56% in the previous quarter and far below the 5.55% peak in 2024, according to the ECB Source: La República. This moderation reflects easing inflationary pressures, though consumer inflation expectations for the next 12 months dipped slightly to 2.9% in July from 3%, and three-year expectations fell to 2.7% Source: Infobae.

Divergent national trends

Inflation varies sharply across the bloc. Spain recorded the highest rate among major eurozone economies at 3.9% in July, up from 3.6% in June, while France (2.4%), Germany (2.8%), and Italy (2.9%) saw lower increases Source: El Español. The lowest rates were in Sweden (0.3%) and Czechia (1.3%), while Romania (8.2%) and Lithuania (5.4%) topped the list Source: La Vanguardia.

Policy implications

With inflation persistently above target, about 83% of economists polled by Reuters expect the ECB to raise its deposit rate by 25 basis points to 2.50% in September Source: La Vanguardia. Lane warned that weather phenomena like El Niño could add upward pressure on food prices in 2027, complicating the ECB's path Source: El Español.