Yearly inflation in the Eurozone dropped to 2.5 per cent in June, down from 2.6 per cent in May, according to preliminary data published by Eurostat on Tuesday.

Inflation in the zone had steadily decreased for months, reaching 2.4 per cent in April, before rebounding to 2.6 per cent in May.

It previously peaked at 10.6 per cent in October 2022.

Services are now the main driver of Eurozone inflation, maintaining a stable rate of 4.1 per cent.

Yearly inflation for food, alcohol and tobacco stands at 2.5 per cent, down from 2.6 per cent in May.

Non-energy industrial goods have a stable year-on-year inflation rate of 0.7 per cent.

Energy prices saw a slight decrease in year-on-year inflation, from 0.3 per cent in May to 0.2 per cent in J

Countries with the highest year-on-year inflation rates in June include Belgium with 5.5 per cent, up from 4.9 per cent in May; and Spain with 3.5 per cent, down from 3.8 per cent.

Croatia has 3.4 per cent in June, down from 4.3 per cent in May.

The lowest yearly inflation rates were recorded in Finland at 0.6 per cent, up from 0.4 per cent in May; Italy at 0.9 per cent, up from 0.8 per cent.

Lithuania has one per cent, up from 0.9 per cent.

According to Bert Colijn, the minor decrease in inflation from 2.6 per cent to 2.5 per cent is insufficient for the European Central Bank (ECB) to cut rates in July.

“With wage growth still stubbornly high, uncertainty around services inflation remains the most important barrier to further rate cuts materializing,” Colijn said.

However, since the economy is performing better than last year, the ECB can afford to wait for more evidence of calming inflation before taking action, he added.

Colijn anticipated the ECB would wait to gather additional data on wages, growth and inflation.

He also anticipated that the ECB would assess the potential impacts of the ongoing French elections, before deciding on a potential new rate cut in September.

Following years of high price levels and rising interest rates, the ECB cut its key interest rates by 25 basis points last month.

The central bank expects inflation to fluctuate around current levels for the rest of the year before declining towards the target level over the second half of next year.

It is anticipated to stand at 2.5 per cent in 2024 and 2.2 per cent in 2025, respectively.

“Our work is not done, and we need to remain vigilant,” ECB President Christine Lagarde said Monday in Sintra, Portugal. “Inflation is projected to return to two per cent in the latter part of next year.”

Considering the size of the inflation shock, this unwinding is remarkable in many ways, she said. “We will not rest until … inflation is back at two per cent.” (Xinhua/NAN)