Broad-Based Decline
The decline was broad-based across components. Energy inflation slowed sharply to 8.5% from 10.8% in May, while services price growth eased to 3.2% from 3.5%, and food, alcohol, and tobacco moderated to 1.6% from 1.9%. Core inflation, which strips out volatile energy and food items, cooled to 2.4% from 2.6%. Among the bloc’s largest economies, inflation fell in Germany to 2.4%, France to 2.0%, and Italy to 3.1%, while Spain held steady at 3.6%. Ggmk
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ECB Poised to Hold
The softer reading strengthens the case for the ECB to pause at its July 23 meeting after raising its deposit rate by 25 basis points to 2.25% in June. Interest rate swap markets now price in a 93% probability of no change next week, with more than 90% of economists expecting a hold, according to Morningstar. EEuropa
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“With the ECB having taken firm action last month, there is no rush to hike interest rates again this month,” said Michael Field, chief European markets strategist at Morningstar. Analysts broadly expect the next move to come in September, with swap markets implying an 85% chance of a quarter-point increase at the September 10 meeting. MMorningstar
Energy Risks Persist
Despite the improvement, inflation remains above the ECB’s 2% target, and renewed Middle East tensions continue to threaten energy supplies. On July 14, escalating friction over strategic shipping corridors pushed energy markets higher once again. The International Energy Agency warned this month that Strait of Hormuz disruptions have driven up gas prices enough to cut global natural gas demand by 0.5% this year. Yyoutube
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The ECB’s own June staff projections see headline inflation averaging 3.0% for 2026 before falling to 2.3% in 2027 and reaching the 2% target in 2028. EEuropa
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