Eurozone May Inflation Rate at 1.9%... Lowest in Eight Months

Additional ECB Rate Cut Expected This Week
Inflation May Rise If EU-US Tariff Talks Fail

The preliminary estimate shows that consumer prices in the eurozone rose by 1.9% in May.

[Image source=EPA Yonhap News]

According to Eurostat, the EU statistics agency, on June 3 (local time), last month's inflation rate increased by 1.9% compared to a year earlier, slowing by 0.3 percentage points from the previous month's rate of 2.2%. This figure is also 0.1 percentage points lower than the market forecast of 2.0%.

This is the first time in eight months, since September of last year, that the inflation rate has not exceeded the European Central Bank (ECB)'s target of 2%.

The eurozone recorded an all-time high inflation rate of 10.6% in October 2022, triggered by the energy crisis that began at the end of February 2022 due to the war in Ukraine.

However, the outlook for June and beyond remains uncertain. If the EU-US tariff negotiations are not concluded by July 9, there is a possibility that, as warned by US President Donald Trump, a 50% tariff could be imposed on all European products. In addition, the 50% US tariffs on steel and aluminum, which will take effect starting June 4, could also drive inflation higher.

For this reason, some within the ECB are calling for caution regarding further interest rate cuts, citing inflationary pressures from increased fiscal spending, including trade tensions and higher defense expenditures.