Evelyn Reynolds

Though it may have been controversial, the July jobs report helped confirm the notion that the U.S. economic engine is sputtering.
The weakness in job growth points to an economy that may be slowing even more than some of the traditional metrics are showing.
Goldman Sachs forecasts growth to be just 1% in the final two quarters due in part to slower consumer spending and “a sharp slowdown in real income growth that reflects weaker job growth.”
White House officials insist the economy is sound and will only get better once President Donald Trump’s One Big Beautiful Bill Act kicks in.

Caution tape hangs near the steps of Federal Hall across from the New York Stock Exchange in New York.
Michael Nagle | Bloomberg | Getty Images

Though it may have been controversial, the July jobs report helped confirm the notion that the U.S. economic engine is sputtering.
Nonfarm payrolls rose by just 73,000 for the month, below even the muted expectations. Heavy downward revisions to the May and June count took the three-month average job gains down to just 35,000, or less than one-third the pace for the same period a year ago.

Traditionally a lagging indicator when it comes to recessions, the weakness in job growth points to an economy that may be slowing even more than some of the traditional metrics are showing.
“We are in a broad economic slowdown. Whether it translates to a recession or not is the question that I’m asking now,” said Luke Tilley, chief economist at Wilmington Trust. “The labor market is key, and it’s hard to gauge what’s going to happen.”
Wilmington has a 50% chance the U.S. slides into recession. Tilley cites concerns over the longer-term hit from tariffs that could depress consumer spending, which drove 68% of all economic activity in the first quarter, as well as business investment and hiring.
In fact, he said pressure from tariffs is one of the reasons that the pass-through from President Donald Trump’s levies hasn’t hit inflation as hard as many economists expected.
“If consumers are shouldering the burden, they’re spending more for imports and they will cut back on recreational spending, airlines, Disney trips, fun parks, hotels, all of that,” he said. “We’ve seen that in the data, and that’s why there’s not inflationary impact.”

Reasons for optimism

To be sure, the growth picture is far from dire at this point.
Gross domestic product increased at a 3% annualized pace in the second quarter, providing on its face a picture of a vibrant economy.
However, when looked at for the first half, GDP averaged only about 1.2% growth, with consumer spending barely up 1%. The primary reason for the big jump in Q2 was a reversal in the import surge during the first quarter as companies sought to get ahead of tariffs. In the first quarter, growth fell 0.5% amid the swell in imports, which subtract from the GDP calculation.
If the July unemployment report portends what’s to come, the picture is bound to get gloomier.
“The most likely outcome is still weaker economic growth in the second half of 2025 and early 2026 compared to 2024 and the first half of this year, but no recession,” Gus Faucher, chief economist at PNC, wrote following the jobs release Friday.
“But given the revised read on the labor market, recession risks are elevated, and higher tariffs make that risk even higher,” he added. “It is easy to see how very weak job growth and higher tariffs could cause consumers to cut back on their spending and businesses to cut back on their investment, pushing the economy into a recession.”
Goldman Sachs forecasts growth to be just 1% in the final two quarters due in part to slower consumer spending and “a sharp slowdown in real income growth that reflects weaker job growth, higher tariff-driven inflation, and reductions in transfer payments in [the fourth quarter] that were included in the recent fiscal bill.”
“Friday’s payrolls report brings payroll growth closer in line with big data indicators of job gains and the broader growth dataset, both of which have slowed significantly in recent months. Taken together, the economic data confirm our view that the US economy is growing at a below-potential pace,” the firm said in a note over the weekend.

Despite the cloudy outlook, White House officials insist the economy is sound and will only get better once Trump’s One Big Beautiful Bill Act kicks in.
Trump himself pushed back hard against the July jobs report, firing Bureau of Labor Statistics Commissioner Erika McEntarfer on Friday as he called the numbers “FAKED” and “RIGGED” in a Truth Social post.
However, White House economist Kevin Hassett on Monday told CNBC the revisions were concerning even as he also touted broader economic strength.
“There are a lot of really good reasons to be super optimistic about second half of the year. But absolutely that jobs number, if the revision turns out to be true, does suggest that there’s less momentum than we thought,” said Hassett, director of the National Economic Council who is thought to be a leading contender for a vacant seat on the Federal Reserve Board of Governors.

Looking to the Fed

Trump administration officials have been calling on the Fed to cut its benchmark funds level that feeds into multiple other consumer interest rates. The Fed last week held the rate steady, and several officials made public comments since the report saying they still think the labor market is strong.
However, further signs of economic weakness could change that.
Housing data has been poor lately, reflecting a declining level of buyers along with rising prices and stubbornly high mortgage rates.
“What are we doing with a national average 30-year mortgage rate still close to 7% in an economy growing at 1%?” veteran economist and strategist Jim Paulsen wrote in a Substack post. “There is nothing ‘healthy or solid’ about these [economic] numbers, they are way below the 2% stall speed, and shout for help.”
Other economists echoed that sentiment.
“To me, today’s jobs report is what entering a recession looks like,” Josh Bivens, chief economist at the Economic Policy Institute, a left-leaning think tank, wrote after the Friday report.
“The economy is on the precipice of recession. That’s the clear takeaway from last week’s economic data dump,” Mark Zandi, chief economist at Moody’s Analytics, posted Sunday on X.
Monday bought more bad news, with factory orders falling 4.8%, actually a touch less than the Dow Jones estimate though the worst reading since January 2024. Also, the Conference Board’s employment trends index declined in July, hitting its lowest since October 2024.

Markets have been resilient

Amid the worrying economic signs, stocks have fallen though not dramatically. Wall Street rallied Monday, with hopes rising that the U.S. and European Union will be able to reach a long-term tariff agreement.
Trading has been volatile lately, with the Dow Jones Industrial Average off 1.7% over the past month.
“This confirmed a lot of our suspicions. Frankly, we were waiting for the other shoe to drop, and now we’re starting to see a few shoes drop,” George Mateyo, chief investment officer at Key Private Bank, said of the jobs numbers.
Trading lately has seen “a lot of complacency” as investors largely ignored the political storms in Washington and took a best-case-scenario outlook toward the economy, Mateyo added.
“A lot of people were anticipating the fact that the good times would keep rolling, and indeed they probably will,” he added. “We still don’t think the base case is that a recession is going to manifest itself. But it’s going to be a pretty big slowdown, given the fact that uncertainty is really high.”
Markets also have vacillated in terms of what they see the Fed doing.
Just before the jobs report, traders were assigning low odds to a rate cut at the central bank’s September meeting, then swung back to pricing in Monday a nearly 90% probability, according to the CME Group. However, there are multiple key data releases until then, and Fed rhetoric this far has been tepid regarding easing.
Mateyo sees the economic and policy uncertainty adding up to a recipe for caution.
“We’ve been cautioning clients to look at their overall risk exposures and perhaps rebalance away from some of the risky sectors of the market,” he said.

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President Donald Trump plans over the next several days to name replacements for two key vacancies, one to fill a spot on the Federal Reserve and other to replace the head of the Bureau of Labor Statistics.
Trump told reporters Sunday that he has several possible candidates for the Fed in mind, and is also is set to replace Erika McEntarfer, the commissioner at the BLS.

US President Donald Trump speaks to journalists at Lehigh Valley International Airport in Allentown, Pennsylvania, on August 3, 2025 as returns to the White House from his Bedminster residence, where he spent the weekend.
Brendan Smialowski | Afp | Getty Images

President Donald Trump plans over the next several days to name replacements for two key vacancies, one to fill a spot on the Federal Reserve and other to replace the head of the Bureau of Labor Statistics.
Both spots opened up Friday — the Fed position through the surprise resignation of Governor Adriana Kugler, and the other from Trump’s stunning decision to fire Erika McEntarfer, the commissioner at the Bureau of Labor Statistics.

Trump told reporters Sunday that he is thinking of several possible candidates for the Fed spot, and that he is set to replace McEntarfer soon.
“I have a couple of people in mind,” Trump said regarding the Kugler vacancy. “I’ll be announcing that probably over the next couple of days.”
Kugler’s Fed term expired next January, but she decided to exit ahead of time. In a letter submitted Friday to Trump, Kugler gave no reason for the move, which takes effect Aug. 8.
As a Fed governor, Kugler was a permanent voter on the Federal Open Market Committee, which sets the central bank’s key funds level used as a peg for interest rates across the U.S. economy. In addition, governors help craft banking regulations.

During her short stint, which lasted less than two years, Kugler consistently aligned herself with the policies of Chair Jerome Powell, who has been on the receiving end of frequent Trump criticism.

Trump has stated that future Fed nominees will be litmus tested for whether they will vote to lower the funds rate.
The Kugler resignation “jump-starts the Trumpification of the Fed by handing President Trump a vacancy into which he can place a potential or even a clearly designated successor to Powell as Fed chair,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note.
Potential successors include former Fed Governor Kevin Warsh, Treasury Secretary Scott Bessent and National Economic Council Director Kevin Hassett.
Controversy over jobs count
Trump sacked McEntarfer following Friday’s disappointing nonfarm payrolls report. The BLS not only reported that the economy added just 73,000 jobs in July, but it also revised the prior two months’ totals lower by 258,000.
In a Truth Social post Sunday, Trump alleged that McEntarfer was responsible for “the biggest miscalculations in over 50 years.”
Revisions are common for monthly jobs numbers as the BLS receives more information through the survey of establishments it uses to calculate the nonfarm payrolls figure. However, as survey responses have declined over time, revisions have risen, with the BLS last year adjusting down its count for the 12-month period preceding March 2024 by 818,000.
“I think it’s really important now that we get a fresh set of eyes over there to try to modernize the labor data, because it has to be transparent, it has to be reliable. It has to be something that market can make big bets on,” Hassett said Monday on CNBC.
However, McEntarfer’s firing has drawn widespread criticism due to worries that the move could politicize the BLS statistics, which are used to set policy and as a barometer for multiple aspects of the economy.
“Potential politicization of the Fed has been much discussed over the past several months, but the risk of politicizing the data collection process should not be overlooked,” wrote Michael Feroli, chief U.S. economist at JPMorgan Chase. “To borrow from the soft-landing analogy, having a flawed instrument panel can be just as dangerous as having an obediently partisan pilot.”
Trump has not public discussed potential replacements for McEntarfer. Deputy Commissioner William Wiatrowski is serving in an acting role now. More

Dr. Adriana Kugler, member of the Board of Governors of the Federal Reserve, speaks to The Economic Club of New York in New York City, U.S., June 5, 2025.
Kylie Cooper | Reuters

Federal Reserve Governor Adriana Kugler announced Friday she is stepping down from her role at the central bank, creating an important vacancy at a time when President Donald Trump is pushing for lower interest rates.
In a letter addressed to Trump, Kugler, 55, did not state a reason for her decision to leave, only noting that she will be returning to Georgetown University as a professor in the fall.

“It has been an honor of a lifetime to serve on the Board of Governors of the Federal Reserve System,” Kugler wrote. “I am especially honored to have served during a critical time in achieving our dual mandate of bringing down prices and keeping a strong and resilient labor market.”
Kugler’s term was set to expire at the end of January 2026. A Biden nominee, she joined the Board of Governors in September 2023, filling the unexpired term of Lael Brainard, who left to serve as a Biden economic advisor. As a governor, Kugler was a permanent voter on the rate-setting Federal Open Market Committee.
Her resignation now paves the way for Trump to put his own nominee in for the board. Two of his prior appointments, Christopher Waller and Michelle Bowman, voted against the decision at Wednesday’s meeting to hold the Fed’s key rate steady, instead indicating they wanted to lower. Kugler was absent for the vote.
Trump alleged without proof that Kugler resigned over a disagreement with Powell on interest rates. Trump added that he was “very happy” about having a Fed vacancy to fill.
Kugler of late has expressed generally hawkish views, with support for holding rates steady until the impact Trump’s tariffs are having on inflation becomes clearer.

Fed Chair Jerome Powell wished Kugler well, saying “She brought impressive experience and academic insights to her work on the Board.”
Trump has said he would litmus test any potential nominees and would only support those in favor of lower interest rates.
In addition to Kugler’s departure, Powell’s term ends in May, though he could choose to stay on as governor into 2028.
Regardless, Kugler leaving would allow Trump to get someone who shares his views on rates and who might be targeted to fill Powell’s seat. The president and some of his advisors have toyed with the idea of a “shadow chair” who essentially could act as a gadfly on the board until Powell leaves. More

July’s nonfarm payroll report showed growth slowing more than expected, and the unemployment rate rose.
Health care and social assistance were largely responsible for the growth seen last month.
More than half of the sectors analyzed recorded job losses, however.

Jose Luis Pelaez Inc | Digitalvision | Getty Images

Health care remained a resilient sector for jobs in July even as the broader labor market showed further signs of slowing, data from the Bureau of Labor Statistics released Friday shows.
Health care and social assistance saw 73,300 jobs added last month, far and away the most growth of any group in the period. When including private education with the health-care group, as some economists do, that growth would have increased to 79,000 for the month.

Nonfarm payrolls in July grew by 73,000, meaning that health care accounted for virtually all of those gains when factoring in the job declines from other spaces. Put differently, last month’s jobs report would’ve been negative overall if the health-care group were to be excluded.
“When you have health care and social assistance essentially doing the lifting on private payrolls growth [and] federal government and government both shedding jobs here where the local government had sort of previously helped on the June participation, you have to say that … there’s a substantial part of it that is essentially frozen,” Mark Hamrick, senior economic analyst at Bankrate, told CNBC. “It’s almost a no-hire, no-fire job market.”

June and May also saw steep downward revisions, with the former being revised to an increase of 14,000 from 147,000 and the latter dropping to a mere 19,000 from 144,000. Those changes indicate that jobs growth has been quietly dwindling for months. Still, there are some areas that are growing.
The BLS said that social assistance’s trend upward demonstrated “continued job growth in individual and family services,” which rose by approximately 21,000. Job growth in ambulatory health care services and hospitals were similarly strong, climbing by 34,000 and 16,000.
Health care and social assistance’s total figure was 57,600 more than retail trade, which had the second highest number of additions. That group saw 15,700 jobs added during the month.

Closely behind retail trade was financial activities, a category that had 15,000 gains.
In contrast, more than half of the groups posted declines in the monthly period. Of the seven out of 13 sectors that pulled back, professional and business services led the way, falling by 14,000 in payrolls.
The government sector, which had initially bolstered gains in June, shed 10,000 jobs in July.
Other notable categories like manufacturing and wholesale trade took a dive alongside government and professional and business services. Manufacturing lost 11,000 positions, while wholesale trade dipped by 7,800.
“This report absolutely raises a red flag,” Hamrick said. “We have another jobs report to come before the mid-September [Federal Reserve] meeting, but I think we’ll now be scouring the landscape – the data landscape and the anecdotal landscape – to see whether this slowing economy story is one that is more consistent.” More

Nonfarm payroll growth was slower than expected in July and the unemployment rate ticked higher, raising potential trouble signs for the U.S. labor market.
Job growth totaled 73,000 for the month, above the June total of 14,000 but below even the meager Dow Jones estimate for a gain of 100,000. June and May totals were revised sharply lower, down by a combined 258,000 from previously announced levels.

At the same time, the unemployment rate rose to 4.2%, in line with the forecast.
The June total came down from the previously stated 147,000, while the May count fell to just 19,000, revised down by 125,000.

Stock market futures fell further after the news while Treasury yields also were sharply lower.
“This is a gamechanger jobs report,” said Heather Long, chief economist at Navy Federal Credit Union. “The labor market is deteriorating quickly.”
The weak jobs report, including the dramatic revisions, could provide incentive for the Federal Reserve to lower interest rates when it next meets in September. Following the report, futures traders raised the odds of a cut at the meeting to 63%, up from 40% on Thursday.

“Today’s report adds weight to signs of a slow but persistent cooling trend. While the labor market is not in crisis, hiring momentum continues to soften, and pressures are beginning to build,” said Ger Doyle, North America regional president at Manpower Group.
There were few signs of strength in the July jobs count, with gains coming primarily from health care, a sector that has continued to show strength in the post-Covid recovery. The group added 55,000 jobs, easily leading the way. Social assistance also contributed 18,000 jobs.
However, federal government employment continued to decline, down 12,000 or the month and 84,000 since its January peak, before Elon Musk’s Department of Government Efficiency began paring down the jobs rolls.
On wages, average hourly earnings increased 0.3%, meeting the estimate, though the yearly gain of 3.9% was slightly higher than expected.

The household survey, which is used to compile the unemployment rate, was even worse than the establishment survey of total payrolls gains. That showed a decline of 260,000 workers, with the participation rate edging down to 62.2%, the lowest since November 2022.
A more encompassing unemployment indicator that includes discouraged workers and those holding part-time positions for economic reasons rose to 7.9%, its highest since March.
The report comes with questions rising about firms’ willingness to hire in the face of ongoing trade negotiations and escalating tariffs.
President Donald Trump has demanded the Fed lower interest rates aggressively. However, the central bank on Wednesday again voted to hold its key borrowing level in place, where it has been since December, despite blistering criticism from the president.
Trump released another angry post Friday morning on Truth Social, appearing to call on the rate-setting Federal Open Market Committee to overrule Chair Jerome Powell.
“Jerome “Too Late” Powell, a stubborn MORON, must substantially lower interest rates, NOW. IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!” Trump posted. Following the jobs report, Trump posted again, calling Powell “a disaster.”
Though there are concerns about where the labor market is headed, top-line economic numbers are still holding up.
Gross domestic product increased at a 3% annualized pace in the second quarter, considerably better than expected. However, that largely reflected the unwinding of a huge import buildup ahead of Trump’s April 2 “liberation day” tariff announcement. Underlying demand numbers in the Commerce Department report were mostly weak, while consumer spending increased from the first quarter was still tepid. More

Swiss businesses and negotiators have been stunned by news overnight that the country faces a 39% U.S. import tariff from Aug. 7, one of the highest rates in the world.
The duty would be a devastating blow to the export-reliant economy and threaten thousands of jobs, industry groups said.
However, analysts stressed that there remained time to negotiate “last minute tweaks and changes” before the new deadline, while the head of the Swiss-American Chamber of Commerce told CNBC it was not “the end.”

A worker adjusts a window display at a Rolex store on Thursday, July 24, 2025.
Bloomberg | Bloomberg | Getty Images

Switzerland is officially on holiday Friday for the country’s national day. But many market watchers have been hauled back to their desks by news overnight that they have been hit with a 39% tariff rate by the White House.
That came as a shock to the Alpine nation. Indications in the Swiss press had been that the country was close to negotiating an outline deal similar to those struck by the European Union, the U.K. and Japan, which set baseline tariffs between 10% and 15%. Instead, it has received one of the highest rates of any country.

That is hugely significant, with the U.S. accounting for around a sixth of Switzerland’s total exports. Businesses breathed a sign of relief in April when the country swerved initial plans for a 31% tariff, being handed an interim 10% duty along with most of the world.

As of late Thursday, new tariff rates on a dozens of countries that have not yet agreed a framework trade arrangement with the U.S. are set to come into force from Aug. 7. Given the precedent set by U.S. President Donald Trump for last-minute deadline changes and down-to-the-wire deals, that does leave room for the situation to change.
Another potential reprieve came as the Swiss Federal Department of Economic Affairs told Reuters on Friday it understands the 39% tariff will not include the pharmaceutical sector, which is separately facing volatility from Trump’s latest comments on drug pricing. CNBC has contacted the White House for comment.

‘Stunned’

Amid the uncertainty, reactions were overwhelmingly negative on Friday.
Switzerland’s federal council said it had “great regret that, despite the progress made in bilateral talks and Switzerland’s very constructive stance from the outset, the US intends to impose unilateral additional tariffs on imports from Switzerland.” It added that it continued to seek a “negotiated solution” and was in contact with U.S. authorities.

Manufacturing association Swissmem said a 39% tariff would hit the tech industry, exports and therefore the whole country “extremely hard,” noting that every second franc brought into the economy was made from foreign trade.

“I am stunned. These tariffs are based on no rational basis and are arbitrary. This decision puts tens of thousands of jobs in the industry at risk,” the group’s director Stefan Brupbacher said.
Beat Wittmann, chairman and partner at Porta Advisors, said the news delivered a “devastating” blow to the Swiss economy and businesses.
“The U.S. leads a zigzagging unilateral war on tariffs and this unpredictability imposes a rising risk premium on financial assets,” he said in emailed comments. “This will lead to a weakening of the Swiss economy, the Swiss Franc and the Swiss equity market, particularly the all-important export sector.”

The Swiss government needs to recognize that the time for “cherry picking, carve outs and special deals” is over, particularly for small, highly-exposed states, Wittmann added.
Key Swiss exports include chemical and pharmaceutical products, watches and jewelry, chocolate, gemstones and electronics.
Adrian Prettejohn, Europe economist at Capital Economics, said in a note that a 39% tariff rate would knock around 0.6% off Switzerland’s GDP, or more with the inclusion of pharmaceuticals — but that he expected it to be negotiated down.

With the Swiss stock market closed for national day, indicators are instead feeding through other avenues such as the performance of London-listed Watches of Switzerland, which fell nearly 9% in morning deals.
In a Friday note to clients, analysts at investment bank Jefferies cited the company, along with Richemont and Swatch Group, as among those that would take the biggest hits from the news, particularly relative to previous expectations. But they added that the Aug. 7 start date allowed for “plenty of last minute tweaks and changes to be agreed.”

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U.S. dollar vs Swiss franc.

The Swiss franc meanwhile slid around 0.4% against the U.S. dollar on Friday.
That comes after a huge appreciation in the franc against the greenback this year, with gains of around 11% as investors hunted for safe-haven assets. The rally has delivered challenges to the economy, which in May marked a return to deflation for the first time since the Covid-19 pandemic — spurring the Swiss National Bank to cut interest rates to zero in June.

‘I do not think it is the end’

Rahul Sahgal, CEO of the Swiss-American Chamber of Commerce, told CNBC’s “Squawk Box Europe” the tariff news was “very disappointing” after many rounds of negotiations with the U.S. Treasury Department.
“I have to say, however, that I hope and I do not think that it is the end,” he said.

“We have still, firstly, those days till the 7th of August, and also, if you read the executive order, it does leave a certain window open, let’s put it that way, saying that if you are in negotiations with the U.S. these additional tariffs may not apply.”
One element of previously-struck deals is a commitment to increase investment in the U.S., which in the case of the EU is set to total $600 billion along with hundreds of billions in additional energy purchases. On this, Sahgal said Switzerland was looking in the range of a $150 billion investment pledge, which was one of the biggest relative to the size of its economy. The country is already the sixth largest overall investor in the U.S., he added.
Sahgal continued that it was hard to say what the sticking point in negotiations had been or how the 39% rate had been calculated, noting that across both goods and services the trade relationship between Switzerland and the U.S. was balanced — but that Trump was only focused on the former.
“Switzerland is a country… of 9 million people, and the U.S. has something like 300 million people. So even if… every Swiss was to drink a bottle of bourbon and eat a steak every single day and buy a Harley Davidson, we would not be able to balance the trade in goods,” he said.
— CNBC’s Carolin Roth, Sophie Kiderlin and Ganesh Rao contributed to this story. More

Annual euro zone inflation came in at 2% in July, unchanged from June.
The reading was higher than the 1.9% expected by economists polled by Reuters.
Earlier in the week, flash data suggested that the euro zone economy grew by more than expected in the second quarter.

A customer stands in front of a fruit and vegetable stall at an open-air market in Paris on July 15, 2025.
Behrouz Mehri | Afp | Getty Images

Euro zone inflation was unchanged at a higher-than-expected 2% in July, flash data from statistics agency Eurostat showed Friday.
Economists polled by Reuters had expected the figure to hit 1.9%, after a 2% reading in June.

So-called core inflation, which strips out more volatile food, energy, alcohol and tobacco prices, came in at 2.3% in July, the same level as during the previous two months, Friday’s data showed.
The closely watched services print meanwhile eased to 3.1% in July after picking up slightly to 3.3% in June.
Following the data release, the yield on Germany’s 10-year bond was more than one basis point higher, while the French 10-year bond yield was up by less than one basis point.
Looking ahead, the fresh inflation data does not suggest that the European Central Bank will pick its interest rate easing cycle back up soon, Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics, said in a note.
The ECB at its July meeting held rates steady for the first time this year. Markets were last pricing in an over 94% chance of the central bank also keeping rates unchanged when it next meets in September, according to LSEG data.

Allen-Reynolds added that, depending on energy prices, euro zone inflation could in fact fall below the 2% ECB target later this year and next year.
“But the undershoot should be quite small and we suspect that core inflation will remain close to 2%. And given that ECB policymakers are content with the current monetary policy stance, we doubt that inflation falling slightly below 2% due to lower energy prices would be enough to prompt another interest rate cut,” he added.
The inflation figures follow on the footsteps of indications earlier this week that showed the euro zone economy expanded by a better-than-expected 0.1% in the second quarter, which was nevertheless sharply down on the 0.6% growth of the three months to the end of March.
Analysts interpreted the data as Europe’s economy so far showing resilience in the face of U.S. President Donald Trump’s tariff policies. The European Union and Washington recently inked a trade agreement which includes a 15% baseline levy for EU goods bound for the U.S. Sectoral tariffs and temporarily reduced so-called reciprocal duties have already been in play.
Duties are widely expected to weigh on economic growth, including in the euro zone, and affect prices of goods for U.S. consumers. Their impact on inflation in Europe remains uncertain. More

Countries that are not listed in the latest order will face an additional duty of 10%.
The modified rates will be effective with respect to goods “entered for consumption on or after 12:01 a.m. eastern daylight time 7 days after the date of the order,” with some exceptions.

U.S. President Donald Trump points a finger as he delivers remarks in the Roosevelt Room at the White House in Washington, D.C., U.S., July 31, 2025.
Kent Nishimura | Reuters

U.S. President Donald Trump signed an executive order Thursday that modified “reciprocal” tariffs on dozens of countries, with updated duties ranging from 10% to 41%.
All goods that are considered to have been transshipped to avoid applicable duties will be subject to an additional 40% tariff, according to the White House.

Countries that are not listed in the latest order will face an additional duty of 10%, the order said. The updated directive modifies tariffs imposed under the earlier executive order issued in April.
The modified rates will be effective with respect to goods “entered for consumption on or after 12:01 a.m. eastern daylight time 7 days after the date of the order,” with some exceptions.
Trading partners that have reached or are near reaching trade and security agreements with the U.S. will be subject to the modified rates until those agreements are concluded, according to the executive order.
Trump followed through on his plan to raise tariffs on exports from Canada to 35% from 25%, starting Friday, barring goods that are covered under the U.S.-Mexico-Canada free trade pact he signed during his first term.
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