Eurozone CPI Slips to 2.8%, Core Miss Opens Door for ECB Hold

Eurozone inflation eased more than expected in June, with headline CPI slowing from 3.2% to 2.8% year-on-year, below the 3.0% consensus. Core inflation, stripping out energy, food, alcohol and tobacco, fell from 2.6% to 2.4%, also missing the 2.5% forecast.

The moderation was broad. Energy inflation dropped from 10.8% to 8.7% as oil prices retreated after Middle East tensions eased. Services inflation cooled from 3.5% to 3.2%. Food, alcohol and tobacco inflation slipped from 1.9% to 1.6%. Non-energy industrial goods inflation held at 0.9%, suggesting underlying goods price pressures remain contained.

The downside surprise in both headline and core readings strengthens the case for the ECB to hold rates at its next meeting. The data suggest the energy shock has not yet generated broader second-round effects through services or wages. The ECB's next policy decision is scheduled for July 27.

For the euro, the softer print reduces the probability of a hawkish surprise. EUR/USD traded near 1.0920 after the release, little changed on the session. The next catalyst for the pair is the U.S. June CPI report due July 12, which will set the relative rate path for the second half of the year.