This decision was largely anticipated by the markets and is being interpreted as laying the groundwork for a potential rate cut later in the year. The impact of the decision was immediately felt in the cryptocurrency markets as well.

Weak Signals of Economic Growth

Data from the private sector in the 20-member Eurozone suggested a mild recovery despite ongoing stagnation in major economies like France and Germany. However, the pace of growth remains weak.

At the same time, unemployment rates across the region continue to hover at historically low levels. Inflation is also near target, with annual inflation recorded at 2% in June—slightly up from 1.9% in May.

Inflation Rising in the U.S. and U.K.

Meanwhile, inflation in the U.S. rose to 2.7% in June, exceeding expectations, compared to 2.4% the previous month. In the United Kingdom, inflation reached 3.6%, indicating a more aggressive price surge compared to Europe.

These developments make the ECB’s decision to hold rates steady even more significant. However, reports from Washington suggesting possible tariff hikes—especially on steel—are raising concerns. With additional tariffs of up to 50% being discussed, many companies are reportedly postponing investment and employment plans.

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Across the European Union, the annual inflation rate was 2.2% in May, down from 2.4% in the previous month. In May 2024, the inflation rate for the EU was 2.7%.

Countries with the Lowest and Highest Inflation Rates

In May, the lowest annual inflation rates were recorded in Cyprus (0.4%), France (0.6%), and Ireland (1.4%). On the other hand, the highest inflation rates were seen in Romania (5.4%), Estonia (4.6%), and Hungary (4.5%).

On a monthly basis, annual inflation fell in 14 member states, remained stable in one, and rose in 12.

Main Contributors to Inflation

According to the May 2025 data, the largest contribution to Euro area inflation came from the services sector (+1.47 percentage points). This was followed by food, alcohol, and tobacco (+0.62 pp), non-energy industrial goods (+0.16 pp), and energy, which had a negative impact (-0.34 pp).

In particular, there was an increase in the contribution from processed food, alcohol, and tobacco, while the decline in energy prices stood out as a disinflationary factor.

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Across the European Union, the annual inflation rate dropped from 2.5% to 2.4%. In April 2024, this rate stood at 2.6%, indicating a gradual slowdown in inflation throughout the EU.

Lowest Inflation in France

The lowest annual inflation rates were observed in France (0.9%), Cyprus (1.4%), and Denmark (1.5%). The price stability in these countries is often linked to structural reforms, especially in the food and energy sectors.

In contrast, the highest inflation rates were recorded in Romania (4.9%), Estonia (4.4%), and Hungary (4.2%). This situation may be due to rising service sector prices in these countries.

Mixed Picture Among Member States

According to the April 2025 data, the inflation rate fell in 13 EU Member States, rose in 11, and remained unchanged in 3. This indicates that economic recovery across Europe remains fragile and varies significantly between countries.

Main Contributors to Inflation

According to Eurostat data, services made the largest contribution to annual inflation in the euro area, adding +1.80 percentage points. This was followed by food, alcohol and tobacco (+0.57 pp), while energy prices contributed negatively with -0.35 pp.

Other items, such as non-energy industrial goods, contributed a limited +0.15 pp to inflation. This shows that falling energy prices helped balance overall inflation, although price increases in the services sector continued to push it upwards.

ECB Moving Closer to Its Target

The European Central Bank’s (ECB) long-term inflation target of 2% is now within reach. While the decline in energy prices makes it possible to achieve this goal, service sector pressures are still keeping inflation alive.

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