Eurozone Inflation Falls To 1.9% Below ECB Target

Inflation in the Eurozone has fallen to 1.9% in May, below the European Central Bank's (ECB) 2% target for the first time since September, driven largely by a slowdown in services inflation and lower energy prices. This decline has fueled expectations that the ECB will cut interest rates at its upcoming June 5 meeting, with analysts anticipating a quarter-point reduction and signals of further cuts to support the slowing Eurozone economy. The ECB's current benchmark rate stands at 2.25%, down from 4% in 2023, and further reductions aim to lower borrowing costs and stimulate growth amid concerns over the economic impact of US President Donald Trump's tariffs on steel, aluminum, autos, and potentially all EU goods, though the latter tariff is temporarily paused pending negotiations. The European Commission has already revised down its growth forecast for the Eurozone to 0.9%, reflecting worries about trade tensions and their effect on the export-driven economy. Despite the disinflation trend, core inflation excluding volatile items remains somewhat elevated at 2.3%, but the overall data has strengthened expectations for a dovish ECB policy stance. The Euro weakened against the US dollar following the inflation data release, while the unemployment rate in the Eurozone fell slightly in April, offering a mixed economic picture as policymakers prepare to adjust monetary policy.