KOF Monetary Policy Communicator for the Euro Area, July 2025

The ECB’s Governing Council stopped (or at least put on hold) its monetary policy easing cycle, with incoming inflation figures being on target. The Governing Council repeated that the current inflation outlook is more uncertain than usual, with the ongoing volatile trade policy environment largely contributing to this high uncertainty.

Annual HICP inflation in the euro area has ticked up to 2.0% in June from to 1.9% in May. Food price inflation and goods inflation edged down to 3.1% and 0.5% respectively. Energy price inflation increased but remains in negative territory at -2.6%. Services inflation registered a small uptick in June to 3.3% from 3.2% in May. Wage pressures are still moderating. Slower growth in unit labour costs can be explained by a stronger productivity growth coupled with slowing labour costs. The previously observed uptick in short-term consumer inflation expectations has reversed over the past two months. Most measures of longer-term inflation expectations currently stand at around 2%.