The rate of the slowdown in the Eurozone’s headline consumer price growth surprised even the most ardent dovish forecasters on Wednesday.
The preliminary reading from the EU statistics office, Eurostat, showed that the annual rate printed 2.8% in June, two tenths below forecasts and cooler than the 3.2% seen last month.
Energy was still the main driver of gains, but its rate decelerated to 8.7% from 10.8% in May. Services also cooled, shaving three tenths to hit 3.2%. Food, alcohol & tobacco printed 1.6%, down from 1.9% prior, and non-energy industrial goods were at 0.9%, stable compared with May.
On the month, CPI fell 0.1% in June, from 2.5% previously.
Core CPI, which excludes energy and food, rose 2.4% y/y, compared with a 2.5% estimate and the prior print.
Breaking down the report, ING’s chief economist, Bert Colijn, said the drop in June was in part due to oil price declines, which are starting to translate into lower prices at the pump.
Interpreting what the energy slowdown means for consumers, Colijn posited that “because gasoline prices respond more slowly to the oil price on the decline than during an increase, this probably means that at current oil price levels, there is still more downward pressure on energy inflation for consumers to come in July.”
Mirroring national data
Source: Eurostat
Of the four main member states, Germany, which accounts for 28% of the euro area HICP, posted 2.3% y/y in June, down from 2.6% previously. France CPI inflation came in at 1.8%, a significant downward surprise, compared with 2.4% in May. In Italy, the 3.1% headline figure was weighed down by services and food. In Spain, both headline HICP and CPI remained unchanged at 3.6% and 3.2%, respectively.
Even before Wednesday’s release, markets had already started to price out the probability of a further rise in the euro area’s base rate. Currently, just 23 basis points of hikes are priced for this year.
No guarantee of further hikes
Since June’s rate decision, a tentative peace deal has been announced between the US and Iran, despite recent infractions on both sides. However, there are lingering doubts about how navigable the Strait of Hormuz actually is.
Domestically, ING’s Colijn noted that both PMI and European Commission sentiment surveys indicated a softening of selling price expectations in June.
Speaking at the ECB’s annual central bank symposium in Sintra, on Tuesday, bank President Christine Lagarde noted that Europe was now more resilient than before. Stating that the bloc had become better equipped to absorb shocks.
On inflation, she said, “expectations remain broadly anchored around 2%.”
Lagarde's overriding message appeared to be that June’s quarter-point rate hike reflected genuine inflation concerns, not just an ‘insurance’ cut, and that future decisions would remain data-dependent amid a volatile geopolitical environment.
“With policymakers not having yet said anything at the ECB conference in Sintra to change our thinking, in our view it is most likely that the bank will leave the deposit rate unchanged at 2.25% over the rest of the year,” posited Capital Economics' Jack Allen-Reynolds, deputy chief eurozone economist.
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- Headline CPI slows faster than forecasts
- Energy, services price growth slows as core inflation slips
- Germany, France data reinforce broader disinflation trend
- Markets pare rate bets as ECB says data-dependent
By Harry Daniels
LiveSquawk News
@HarryDaniels71
12:00 GMT | 1 July 2026
The rate of the slowdown in the Eurozone’s headline consumer price growth surprised even the most ardent dovish forecasters on Wednesday.
The preliminary reading from the EU statistics office, Eurostat, showed that the annual rate printed 2.8% in June, two tenths below forecasts and cooler than the 3.2% seen last month.
Energy was still the main driver of gains, but its rate decelerated to 8.7% from 10.8% in May. Services also cooled, shaving three tenths to hit 3.2%. Food, alcohol & tobacco printed 1.6%, down from 1.9% prior, and non-energy industrial goods were at 0.9%, stable compared with May.
On the month, CPI fell 0.1% in June, from 2.5% previously.
Core CPI, which excludes energy and food, rose 2.4% y/y, compared with a 2.5% estimate and the prior print.
Breaking down the report, ING’s chief economist, Bert Colijn, said the drop in June was in part due to oil price declines, which are starting to translate into lower prices at the pump.
Interpreting what the energy slowdown means for consumers, Colijn posited that “because gasoline prices respond more slowly to the oil price on the decline than during an increase, this probably means that at current oil price levels, there is still more downward pressure on energy inflation for consumers to come in July.”
Of the four main member states, Germany, which accounts for 28% of the euro area HICP, posted 2.3% y/y in June, down from 2.6% previously. France CPI inflation came in at 1.8%, a significant downward surprise, compared with 2.4% in May. In Italy, the 3.1% headline figure was weighed down by services and food. In Spain, both headline HICP and CPI remained unchanged at 3.6% and 3.2%, respectively.
Even before Wednesday’s release, markets had already started to price out the probability of a further rise in the euro area’s base rate. Currently, just 23 basis points of hikes are priced for this year.
Since June’s rate decision, a tentative peace deal has been announced between the US and Iran, despite recent infractions on both sides. However, there are lingering doubts about how navigable the Strait of Hormuz actually is.
Domestically, ING’s Colijn noted that both PMI and European Commission sentiment surveys indicated a softening of selling price expectations in June.
Speaking at the ECB’s annual central bank symposium in Sintra, on Tuesday, bank President Christine Lagarde noted that Europe was now more resilient than before. Stating that the bloc had become better equipped to absorb shocks.
On inflation, she said, “expectations remain broadly anchored around 2%.”
Lagarde's overriding message appeared to be that June’s quarter-point rate hike reflected genuine inflation concerns, not just an ‘insurance’ cut, and that future decisions would remain data-dependent amid a volatile geopolitical environment.
“With policymakers not having yet said anything at the ECB conference in Sintra to change our thinking, in our view it is most likely that the bank will leave the deposit rate unchanged at 2.25% over the rest of the year,” posited Capital Economics' Jack Allen-Reynolds, deputy chief eurozone economist.