Thursday, 21 August 2025, 16:57
Spain continued to outstrip the eurozone countries in inflation last month. In July, the national economy recorded an annual inflation rate of 2.7%, according to data confirmed on Wednesday by Eurostat, seven tenths above the 2% recorded in the eurozone, the same rate as the previous month.
Spain is in the top part of a ranking in which the rest of the bloc’s major powers remain below 2%, the inflation target set by the European Central Bank (ECB).
This is the second consecutive month that the eurozone has kept its inflation rate at 2%, with the lowest rates recorded by France (0.9%) and Ireland (1.6%), while the largest increases compared with July 2024 were in Estonia (5.6%), Latvia (3.9%) and Greece (3.7%). In the case of Spain, the harmonised inflation rate (the common indicator for measuring prices in the euro area) rose from 2.3% in June to 2.7% in July.
Energy prices fell by 2.4% in July in the eurozone, while fresh food prices rose by 5.4% compared with July a year ago and continue to climb after the 4.6% rise recorded in June. Excluding energy and fresh food prices, core inflation was again 2.3% in July, which gives the ECB the incentive to keep rates at their current level.
At its last meeting, the central bank decided to maintain interest rates and to halt the cuts it had been making for the last seven sessions due to the high uncertainty caused by the tariff war unleashed by Donald Trump since his arrival at the White House in January. At the meeting on 24 July, president of the ECB Christine Lagarde assured that European inflation is in “a good place”, although with nuances.
Risk of turbulence
The geopolitical and trade turbulence and its possible impact on inflation led the ECB to remain alert and opt for caution, with a decision that was unanimous. Despite not having a negotiating mandate, the ECB followed the dialogue between Brussels and Washington “very closely” and was clear that “the sooner this situation is resolved, the less uncertainty there will be”.
Although the ECB considers that it is in a “good position” to navigate these waters, global uncertainty forces it to approach each decision “meeting by meeting” depending on events. For example, the tariff pact between the EU and the US, which established a 15% tariff on all exports to the US, had not yet been signed when the last meeting was held. At the next meeting on 11 September, it will be known what the ECB’s path will be and whether it will remain aligned with the US Federal Reserve (Fed), which will meet on 16 September.
Lagarde anticipates a slowdown due to tariffs
It is expected that the tariffs will have an impact on the European economy during the second half of the year, with the increase in the prices of exports to the US. On Wednesday, Lagarde warned that economic activity in the euro area will lose momentum in the third quarter due to the implementation of the agreed tariffs and the normalisation of trade flows after the measures in anticipation of the tariffs applied in the first months of the year.
Speaking at the World Economic Forum in Geneva, she said that the recent EU-US trade agreement imposes tariffs that are slightly higher, but close to the assumptions used by the ECB in its projections. Moreover, while the US is an important trading partner, Lagarde defended the need for Europe to seek trade links with other countries, taking advantage of the strengths of its export-oriented economy.