Eurozone CPI Miss Gives ECB Time to Wait on Next Cut

Eurozone inflation eased more than expected in June, dropping to 2.8% from 2.9% in May and undershooting the 3.0% consensus forecast. Core inflation, which strips out energy, food, alcohol and tobacco, fell to 2.4% from 2.9%. Both prints came in below the median estimate.

The details show broad-based cooling. Energy price inflation slowed to 8.7% from 10.8% in May. Food inflation eased to 1.6% from 1.9%. Services inflation, the component the European Central Bank watches most closely for domestic price pressures, dipped to 3.2% from 3.5%.

The monthly data told a slightly more mixed story. Headline prices fell 0.1% on the month, driven by a 1.7% drop in energy. Food prices slipped 0.2%. Services prices, however, rose 0.4% month-on-month. That pushed the core monthly estimate up 0.2%.

That monthly stickiness in the core component means the ECB is unlikely to declare victory. The bank delivered its first rate cut of the cycle in June, lowering the deposit rate by 25 basis points to 3.75%. Since then, policymakers have signalled they are in no hurry to follow up. President Christine Lagarde said the bank needs “more time” to be confident inflation is on a sustainable path back to 2%.