Eurozone Inflation Rises to ECB Target of 2% in June
Final data released by Eurostat on Thursday confirmed a slight increase in the Eurozone's annual inflation rate for June 2025, reaching the European Central Bank’s (ECB) official target of 2%. The figure aligns with earlier flash estimates published on July 1, signaling growing price stability across the region.
The inflation rate rose from 1.9% in May to 2% in June, marking a notable moment as inflation returns to the ECB’s desired level after extended periods of volatility, largely driven by energy and food price shocks.
Core Inflation Remains Steady
Core inflation, which excludes volatile food and energy prices to better reflect underlying price trends, held steady at 2.3% in June — unchanged from May and in line with analysts’ expectations. This suggests that fundamental price pressures remain consistent even as headline inflation approaches its target.
The Harmonized Index of Consumer Prices (HICP) also rose by 0.3% month-on-month, matching preliminary estimates.
Energy Prices Decline While Services Show Slight Pressure
Energy prices continued their downward trend, falling 2.6% year-on-year in June — a softer decline compared to -3.6% in May. This ongoing decline helped counterbalance price pressures in other sectors.
In contrast, prices for food, alcohol, and tobacco rose at a slower pace of 3.1%, compared to 3.2% the previous month. Non-energy industrial goods inflation also moderated slightly to 0.5%, down from 0.6% in May.
Meanwhile, services inflation saw a marginal increase to 3.3% in June from 3.2% in May, indicating persistent but controlled inflationary pressures in the service sector, which represents a major portion of the Eurozone economy.
Outlook and Policy Implications
The return of headline inflation to the ECB’s target provides a degree of relief and a signal of progress in the central bank’s efforts to curb inflation. However, steady core inflation and persistent price increases in services suggest that the ECB may remain cautious before initiating any interest rate cuts.
Markets and policymakers will closely watch upcoming ECB statements and economic projections to assess whether the current inflation trajectory supports the beginning of a monetary easing cycle in the latter part of the year.
Overall, June’s inflation data suggests a balance is emerging — headline figures indicate success in bringing inflation down, while underlying pressures warrant a prudent and measured approach going forward.
