Eurozone inflation slows to 2.5% in June as ECB rate cut hopes grow

This article was originally published in English

After a brief rise in May, the eurozone’s annual inflation rate fell in June, according to economists’ expectations and increased hopes for a possible interest rate cut by the European Central Bank (ECB).

Harmonized Index of Consumer Prices Eurozone up 2.5% year-on-year in June slight decrease compared with 2.6% recorded in the previous month, according to data Eurostat preliminary estimates published on Tuesday. Inflation rose 0.2% on a monthly basis, maintaining the same pace as in May.

Studying main components of inflation In the eurozone, services posted their highest annual growth rate in June at 4.1%, unchanged from May, followed by food, alcohol and tobacco at 2.5%, slightly below 2.6% May; non-energy industrials – 0.7%, stable compared to May; and energy – 0.2%, which is down from 0.3% in May. Excluded food and energyCore inflation fell from 2.9% year-on-year in May to 2.8% in June, in line with market expectations.

Inflation in Belgium hits 10-month high, while Germany’s inflation falls

Among eurozone members, Belgium faced persistently high inflation in June. agreed annual rate which reached 5.5%, the highest level since August 2023. In monthly terms, inflation in Belgium accelerated by 0.5%.

In the Netherlands, inflation also rose from 2.7% to 3.5%, reaching the highest level since August 2023. Other countries that recorded increases in inflation were Italy, where the inflation rate rose from 0.8% year-on-year to 0.9%, and Finland, where inflation rose from 0.4% to 0.6%, although still very below the quarterly average. In Latvia, inflation increased from 0% to 1.4%, and in Lithuania from 0.9% to 1%.

In Germany, harmonized consumer prices rose by 2.5% compared to June 2023, down from 2.8% in the previous month. In France, inflation slowed from 2.6% year-on-year to 2.5%.

Lagarde says ECB’s work is not done

The European Central Bank’s efforts to fight inflation are “not over yet” and political leaders They must remain vigilant, its president Christine Lagarde said on Monday.

Speaking to the central bank’s Monetary Policy Forum in Sintra, Lagarde said recent policy measures had helped stabilize inflation expectationsInflation is expected to return to 2% on a sustainable basis in the second half of 2025.

“We still face some uncertainties about future inflation,” Lagarde warned, adding that political leaders it will take them time to collect enough data This allows them to believe that the risks of higher inflation have been mitigated.

Does comparison Speaking to the late footballer and manager Sir Bobby Robson, Lagarde stressed that “the first 90 minutes are the most important.” Likewise, he stated: “We will not rest until we win the game and inflationary income at 2%.”

Market reaction

Operators have increased a little The probability of an ECB rate cut in September is now estimated at 86%. Market participants expect a total of 44 basis points in rate cuts by the end of the year, which implies almost two additional ECB policy adjustments.

The euro fell 0.2% against the dollar to 1.0716, looking set to end a three-session winning streak. Euro zone sovereign yields were little changed after the inflation data, with two-year Schatz bonds trading at 2.90%. Sovereign yields rose sharply on Monday. adding 10 basis points to reach 2.60%, which is due to a combination of rising oil prices and political uncertainty in both Europe and the United States.

European shares fell on Tuesday, with the Euro Stoxx 50 index down more than 1% at 11:20 CET. Both Germany’s DAX and France’s CAC 40 were down.a similar decrease was recordedMadrid lagged, with the IBEX 35 index down 1.4%, reflecting low risk appetite. Munich RE, Bayer and Banco Santander were the biggest laggards among Top 50 European Stockswith a decline of 3.9%, 2.9% and 2.8% respectively.