Inflation across the European Union (EU) has fallen to an annualized 1.9%, which is below the European Central Bank’s (ECB) 2% target.
Statistics agency Eurostat attributed the 1.9% inflation reading for May to a steep decline in prices for services. Economists polled by the Reuters news agency expected the May reading to come in at 2%, compared to April’s 2.2% annualized figure. Services inflation fell to 3.2% in May, down from 4% in April.
Core inflation, which excludes energy, food, tobacco and alcohol prices, eased to 2.3% in May from 2.7% the previous month. Inflation has been steadily declining across Europe in recent months amid continued uncertainty for the Euro zone economy.
The latest data will be considered by the European Central Bank as it makes its next interest rate decision in early June. The central bank’s benchmark interest rate, known as the “deposit facility rate,” is currently at 2.25%, down from a peak of 4% in 2023.
Futures traders are betting 95% that the European Central Bank makes a 25-basis point interest rate cut at its next policy meeting on June 5. The Euro currency weakened 0.3% against the U.S. dollar following news of the May inflation reading.
