Eurozone inflation slows to 2.8% in June as price pressures continue to ease

Annual inflation across the Eurozone declined to 2.8% in June from 3.2% in May, according to final figures released by Eurostat on Friday.

The reading confirmed the preliminary estimate published earlier this month and came in below economists’ expectations of 3.0%. On a monthly basis, consumer prices in the 21-country single currency bloc fell by 0.1%, matching the initial estimate.

Lower energy and food prices weigh on inflation

The latest data mean headline inflation averaged 3.0% during the second quarter, below the European Central Bank’s projection of 3.2%.

Economists at Capital Economics said the moderation was driven in part by lower fuel prices during June, which reduced energy inflation. They also noted that food inflation continued to soften.

Core inflation also eased to 2.4%, reversing the increase recorded in May that had been driven by higher prices for tourism-related services. The June reading returned to the level last seen in February.

According to Capital Economics, airlines may have absorbed much of the increase in jet fuel costs caused by oil supply disruptions linked to the conflict involving Iran, limiting the impact on consumer prices.

ECB continues to monitor inflation risks

While energy prices eased during June following a fragile ceasefire between the United States and Iran, the recent resumption of military exchanges has once again pushed crude oil prices higher, raising concerns that inflationary pressures could strengthen again.

The European Central Bank raised interest rates last month in an effort to contain inflation, warning that the conflict in the Middle East could generate additional upward pressure on prices.

Excluding energy and unprocessed food, harmonised consumer price inflation across the Eurozone stood at 2.1% year-on-year and increased 0.2% compared with the previous month.