Eurozone inflation edged down in June, helped by lower food and energy prices, as markets saw signs that the inflation surge of the past few years was decisively brought back under control.
Preliminary inflation figures for the European Union as a whole came in at 2.5%, Eurostat figures showed, down from 2.6% last month and in line with economists' expectations.
Core inflation, which excludes volatile factors such as food and energy, remained at 2.9% in June, slightly above expectations.
The figures will come as a relief to policymakers as May's figures showed inflation rose slightly, reflecting higher energy and services costs.
While inflation progress has slowed in recent months, headline inflation is still down from 5.5% a year ago and a peak of 10.6% in October 2022.
Despite the May rate hike, the European Central Bank (ECB) felt confident enough to cut interest rates for the first time in five years last month, taking its key interest rate to 3.75%.
However, the ECB was deliberately vague about the future direction of interest rates, reflecting uncertainty about whether domestic price pressures will persist.
Figures released today showed that services inflation remained at 4.1% in June, higher than most rate setters would like. Price increases in the services sector are generally seen as a good gauge of domestic inflation trends.
Shortly before the data was released, ECB chief economist Philip Lane said rate setters “still have doubts about services inflation.”
Kyle Chapman, currency markets analyst at Ballinger Group, commented: “Strong services inflation, backed by rising wage growth and falling unemployment, is starting to become a real concern for policymakers and could act as a drag on rate cuts.”
Data released earlier this year also showed wage growth returning to a record high in the first quarter of this year, raising concerns about continued inflationary pressures after most economists had expected wage growth to slow.
The central bank confirmed it would continue to take a “data-dependent, meeting-specific approach” over the coming months, stressing that it would not commit in advance to a specific interest rate path.
Separate figures released today showed the unemployment rate remained at a record low of 6.4% in May.
