Euro area headline inflation is forecast to dip to 3.0% in June, driven by falling energy costs, but core pressures persist.
Eurozone inflation is expected to ease to 3.0% in June from 3.2%, marking its first decline since the Ukraine war began, as lower oil prices reduce energy costs. Core inflation, however, remains sticky at an estimated 2.5%, keeping ECB policymakers wary of premature rate cuts.
Recent data from Spain and Belgium showed softer headline readings, reinforcing expectations for a broader slowdown. Yet, geopolitical tensions in the Middle East and volatile oil markets could disrupt the trend, complicating the ECB’s inflation outlook.
While the peak in inflation may be behind, the ECB is unlikely to shift its hawkish stance until core pressures ease sustainably. Markets will watch Wednesday’s HICP release for confirmation of the downturn.