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Eurozone inflation hit 2 per cent in June, rising back up to the European Central Bank’s medium-term target.
June’s annual inflation reading was an increase from May’s figure of 1.9 per cent and in line with economists’ expectations in a Reuters poll.
The ECB has halved rates to 2 per cent since last summer but is expected to hold borrowing costs steady at its next meeting, with investors pricing in one more quarter-point cut later this year.
Core inflation, excluding volatile food and energy prices, remained steady at 2.3 per cent in June.
The closely watched figure for services inflation — a core gauge for domestic price pressures that has remained well above the 2 per cent target for more than three years — rose to 3.3 per cent, up slightly on the 3.2 per cent it reached in May.
President Christine Lagarde said last month that the ECB believed it was now “in a good position to navigate the uncertain conditions” and that the central bank was “getting to the end of a monetary policy cycle”.
Investors interpreted the remarks as a sign that the ECB would pause its rate cuts at its next meeting in July.
The euro was largely unchanged after Tuesday’s data release at $1.180.
The currency has appreciated 14 per cent against the US dollar since the start of the year, making many imports to the Eurozone cheaper and having a downward effect on wider price pressures.
Oil prices temporarily soared by up to 26 per cent after Israel began bombing Iran in June, reaching the highest level since the start of the year. However, most of those gains reversed after the US entered the conflict and brokered a ceasefire.
Market expectations for interest rate cuts were unchanged after the June inflation figures were published. Traders continued to give a roughly 10 per cent chance to a quarter-point rate cut at the ECB’s next meeting in July, according to levels implied by swaps markets.
