Inflation in the Eurozone remains stable, reinforcing the view of the European Central Bank to keep interest rates unchanged.

Jin10 data reported on August 1st that the annual inflation rate in the Eurozone for July was 2%, which is comparable to the data from June, stabilizing at the European Central Bank's target level, slightly above the expected 1.9%. This surprise may support expectations that policymakers will maintain the key interest rate unchanged next month. Recent data indicates that economic growth in the Eurozone has also surpassed expectations, with economic activity rising in the second quarter, contrary to expectations of slight contraction. Since May of this year, inflation in the Eurozone has been at or below the European Central Bank's target level. Staff at the European Central Bank predict that the average inflation rate will fall to 1.6% by 2026 and return to the target level by 2027. Economists believe that the increased tariffs in the United States will suppress inflation in the Eurozone through two mechanisms: on one hand, it will dampen demand for European manufactured goods; on the other hand, European companies may proactively lower prices to seek alternative markets in response to significantly increased tariffs from the United States, thereby pushing prices downward. Additionally, the appreciation of the euro may further suppress inflation.