Euro area: Core inflation momentum still around 2.5%

Research evidence excerpt

Euro area: Core inflation momentum still around 2.5%

J P M O R G A N Europe Economic Research

31 July 2026

Euro area: Core inflation

momentum still around 2.5%

• Core prices rose 0.35%m/m, sa, which is firm but comes after two softer Economic and Policy Research

months Greg Fuzesi

• Core momentum looks stuck again at a 2.5%ar (44-20)greg.x.fuzesi@jpmorgan.com7134-8310

J.P. Morgan Securities plc• Exact drivers of this will be easier to assess with the details in the final

report

Euro area headline and core inflation ticked up 0.1%-pt to 2.9%oya and 2.5%oya,

respectively. This was in line with our expectation on headline and 0.1%-pt higher

on core, although our forecast was close in the rounding.

Energy inflation rose 1.5%-pt to 10.0%oya as new tensions in the Middle East

pushed up Brent (and hence fuel prices) during the month and as some energy

support measures expired in some countries. Further pass-through is likely in

August unless Brent declines again. Food inflation continues to surprise on the

downside, slipping another 0.3%-pt to 1.2%oya, mostly reflecting moderation in

unprocessed food inflation. We note, however, that pass-through from energy to

food can take quite a while and, therefore, some upward pressures may still show

up. In the ECB staff’s forecast, the peak impact from the energy shock on food

inflation is not until 1H27.

The increase in core inflation reflected a 0.35%m/m, sa, increase in core prices in

July. This is a large gain, following two softer months (May/June) with average

gains of only 0.14%m/m, sa. The upside surprise came from core goods (0.41%m/

m, sa) rather than services (0.33%m/m, sa). This pushed up the annual rate of core

goods inflation by 0.2%-pt to 0.9%oya, while services inflation increased 0.1%-pt

to 3.3%oya.