Volkswacht Bodensee - Eurozone inflation eases slightly in June

The European Central Bank will welcome the slowdown in inflation again but the rate has remained stubbornly above the Frankfurt-based body's two-percent target.

Consumer price increases in the single currency area stood at 2.5 percent in June, down from a 2.6-percent rate in May, the EU's statistics agency said.

The May reading had been higher than expected, ticking above the 2.4 percent rate registered in April.

Economists surveyed by FactSet and Bloomberg had forecast that inflation would ease to 2.5 percent in June.

Core inflation, which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the bank, was unchanged at 2.9 percent in June. Experts had expected it to cool to 2.8 percent.

Inflation has slowly come down since reaching a 10.6-percent peak in October 2022 following the outbreak of war in Ukraine, which forced the ECB to launch an unprecedented streak of interest rate hikes.

- ECB 'vigilant' -

The ECB cut interest rates for the first time since 2019 on June 6.

ECB officials have however tried to temper expectations of another cut to borrowing costs at their July meeting, saying there was no "pre-determined" rate path.

"Our work is not done, and we need to remain vigilant," warned ECB president Christine Lagarde on Monday.

"We will not rest until the match is won and inflation is back at two percent," she added in a speech in Portugal.

Economists view the chances of another cut at the ECB's next meeting in July as low, but there are growing expectations that it could lower rates later this year.

The ECB in June also revised its predictions, expecting eurozone inflation to come in at 2.2 percent in 2025 before falling to 1.9 percent the following year.

Tuesday's data showed energy price rises slowed to a rate of 0.2 percent in June, down from 0.3 percent in May.

Food, alcohol and tobacco price increases also eased to 2.5 percent last month, a slight drop from 2.6 percent in May, according to Eurostat.

Across the eurozone, Finland recorded the lowest inflation rate in June, at 0.6 percent, Eurostat data showed. Italy came second, registering an inflation rate of 0.9 percent in June.

Belgium was the highest, at 5.5 percent.

Other Eurostat data published on Tuesday showed the unemployment rate in the single currency area was stable at 6.4 percent in May, a record low.

W.Huber--VB