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The Eurozone Inflation Conundrum: "Benign" Data Suggests Target Achievement, But Will the Future Really Be Calm? ⑴ Inflation data for major eurozone economies this month met or slightly exceeded expectations, indicating that price growth across the currency area remains close to the ECB's 2% target. ⑵ After years of exceeding the target, eurozone inflation retreated to 2% this summer, and the ECB currently expects it to remain near that level. ⑶ Official data showed that Italy's inflation rate fell to 1.7% in July from 1.8% in June, slightly above the expected 1.6%. ⑷ France's inflation rate remained unchanged at 0.9% in July, above the expected 0.8%. ⑸ Combined with the expected rise in Spanish inflation from 2.3% to 2.7%, this suggests that there may be modest upside risks to Friday's eurozone headline inflation data, which economists generally expect to be 1.9%. ⑹ Nevertheless, the ECB is unlikely to be concerned by this minor deviation, having previously stated that inflation is contained and that it is in no rush to adjust interest rates again after halving them to 2% in June. ⑺ The ECB also hopes to wait until it has a clearer understanding of how global trade conflicts will affect prices before taking action. ⑻ Trump's tariff rhetoric is expected to suppress prices in the short term, but major adjustments in corporate value chains may push up price pressures in the future. ⑼ The ECB currently expects inflation to fall below 2% in the coming months and to remain below target for 18 months before price growth returns to 2% in 2027. ⑽ This mild inflation outlook and relatively resilient growth are the reasons why financial investors believe that the ECB is close to completing its rate-cutting cycle. ⑾ The market sees less than a 50% chance of another rate cut this year and has begun to digest the possibility of a rate hike before the end of 2026. ⑿ Eurozone inflation data due on Friday will also be affected by German data, but data from German states showed little change from last month.