Emre Yumlu 
Annual inflation in the Eurozone reached 2.0% in June 2025, aligning with the European Central Bank (ECB)’s long-term target. According to preliminary data released by Eurostat, this marks a slight uptick from May’s reading of 1.9%.
This figure met economists’ expectations and signals that monetary policy efforts across Europe may finally be achieving their intended impact of taming inflation.
Services Inflation on the Rise
Among the key drivers, services inflation stood out in June. This category rose to 3.3%, up from 3.2% in May, although still below April’s 4% level. This uptick is especially relevant as services are a core component closely monitored by the ECB.
Core Inflation Holds Steady
Core inflation—which strips out volatile categories like energy, food, alcohol, and tobacco—remained flat at 2.3% in June. The stable figure reflects broader price pressures beginning to stabilize across the euro area.
Diverging Trends in Major Eurozone Economies
Inflation data from key euro area economies showed mixed signals. Germany saw a slight easing in harmonized inflation, France and Spain experienced modest increases, while Italy remained unchanged. Collectively, these variations helped push the overall euro area figure toward the ECB’s 2% benchmark.
A Cautious Outlook on Rates
Given the current inflation environment, analysts increasingly expect the ECB to hold interest rates steady at its next meeting on July 25. However, a potential 25 basis-point cut is still on the table for September.
ECB Chief Economist Philip Lane reinforced this outlook, stating:
“The cycle of bringing inflation down from 10% to 2% is done. But going forward, we must remain alert to ensure any deviation doesn’t affect the medium-term outlook.”
His comments reflect a continued data-dependent approach to monetary policy.
Risks Remain on the Horizon
Despite meeting the inflation target, economists warn of lingering risks that could derail the disinflation process. These include persistent services inflation, volatility in oil prices driven by geopolitical tensions in the Middle East, and potential U.S. trade tariffs.
Inflation Breakdown for June 2025
According to the Eurostat flash estimate, here’s how the components of inflation fared in June:
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Services: 3.3% (May: 3.2%)
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Food, alcohol & tobacco: 3.1% (May: 3.2%)
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Non-energy industrial goods: 0.5% (May: 0.6%)
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Energy: -2.7% (May: -3.6%)
When Will Final Data Be Released?
Eurostat is set to publish the full inflation dataset for June on July 17, 2025. This release will be closely watched by policymakers and markets alike as the ECB prepares its next move.
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