Eurozone inflation softened in June as expected, but services inflation showed no signs of easing, reducing the European Central Bank's room for further rate cuts.
Preliminary data from Eurostat showed consumer prices grew 2.5 percent year-on-year, slowing from 2.6 percent in May.
The preliminary figure was in line with expectations. The ECB aims to raise inflation to its 2% target in due course.
Meanwhile, core inflation, which excludes energy, food, alcohol and tobacco prices, remained steady at 2.9% in June.
On a monthly basis, the HICP rose 0.2% in June. Final data is due to be released on July 17.
Among the major components of inflation, the services sector posted the biggest annual increase at 4.1 percent, the same as in May, the data showed.
This was followed by food, alcohol and tobacco, which rose 2.5%, slowing from the previous month's 2.6% increase. Energy price increases slowed to 0.2% from 0.3%.
Prices of non-energy industrial products recorded a steady increase of 0.7 percent.
Jack Allen Reynolds, an economist at Capital Economics, said the odds of the ECB cutting interest rates at its July meeting were already looking slim and that today's inflation readings, particularly the continued strength of services inflation, would reinforce policymakers' inclination to tread very cautiously.
Last month, the ECB cut its key interest rate by 25 basis points, taking the refinancing rate to 4.25%, the first cut since 2019.
ECB staff currently expect headline inflation to be 2.5% this year, 2.2% next year and 1.9% in 2026.
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