Euro zone inflation fell in June, official data showed on Tuesday, but experts say it's not enough to prompt the European Central Bank to accelerate its interest rate cutting cycle despite slowing economic growth.
Consumer prices are still above the ECB's 2% target, but a return to easing inflation is sure to be welcomed by officials.
Consumer price inflation in the single currency area fell to 2.5 percent in June from 2.6 percent in May, according to the European Union's statistics office.
The May figure was higher than expected, up from 2.4% in April.
Economists surveyed by FactSet and Bloomberg had expected inflation to ease to 2.5% in June.
Core inflation, which excludes volatile energy, food, alcohol and tobacco prices and is a key gauge for the central bank, was stable at 2.9% in June after experts had expected it to fall to 2.8%.
Inflation has been declining slowly since hitting a peak of 10.6% in October 2022 after the outbreak of the Ukraine war, which forced the ECB to implement an unprecedented series of interest rate hikes.
The ECB cut interest rates for the first time since 2019 on June 6, but officials are seeking to calm expectations that borrowing costs will be cut further when it meets in July.
European Central Bank President Christine Lagarde warned on Monday that “our work is not done. We need to remain vigilant.”
“We will not rest until we win the game and get inflation back to 2 percent,” she added in a speech in Portugal.
Experts said Tuesday's data would likely reinforce the ECB's cautious stance.
“The ECB is already unlikely to cut rates at its July meeting and the June inflation data will likely encourage policymakers to tread very cautiously,” said Jack Allen Reynolds of Capital Economics, a London-based consultancy.
But hopes are growing that interest rates could be cut later this year.
But “stubbornly high” services inflation “will pose a headache” for the ECB, according to Riccardo Marcelli Fabiani of Oxford Economics.
Services prices rose 4.1 percent in June, remaining stable compared with May, Eurostat data showed.
However, energy price growth slowed to 0.2% in June from 0.3% in May.
Price increases for food, alcohol and tobacco also eased to 2.5 percent last month, down slightly from 2.6 percent in May, according to Eurostat.
Across the eurozone, Finland had the lowest inflation rate in June, at 0.6%, according to Eurostat data, followed by Italy in second place, with inflation at 0.9% in June.
The highest rate was in Belgium, at 5.5%.
With inflation stabilising, the ECB revised its forecast for 2025 in June.
The bank said it expects euro zone inflation to hit 2.2% next year before falling to 1.9% in 2026.
