Eurozone Inflation Falls More Than Expected, Eases ECB Pressure

Eurozone inflation fell more than expected in June, data from Eurostat showed Tuesday, easing pressure on the European Central Bank to deliver another rate hike in the near term.

The headline rate dropped to 2.8% last month from 3.2% in May, below the 3.0% economists had forecast. Core inflation, which strips out volatile food and energy prices, declined to 2.4% from 2.6% in May, also undershooting the 2.5% consensus estimate.

Lower prices for energy and food drove the improvement, Eurostat said. That relief comes after a period when stubbornly high services costs kept core inflation elevated. The June print marks the lowest reading since early 2022.

ECB policymakers said the figures buy them time. There is no rush to follow the 25-basis-point rate hike delivered at the June 11 meeting, several officials said. The data provide more breathing room to assess underlying price dynamics before moving again.

The ECB targets 2% inflation over the medium term. While June's numbers move closer to that goal, energy costs remain above pre-war levels and wage growth is still strong. Economists expect the central bank to raise rates again in September or October. The situation remains fragile, they said, and renewed supply-side shocks could reignite price pressures.

The euro held near $1.14 after the release, little changed on the session. European government bond yields edged lower as traders reduced bets on further tightening. The German 10-year Bund yield slipped about 4 basis points. Euro Holds Near $1.14 as German, French Inflation Eases

The ECB's next policy meeting is July 27. Most economists expect the bank to hold rates steady there and deliver the next hike in September, when updated staff projections become available.