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Eurozone inflation hit 2 per cent in June, rising back up to the European Central Bank’s medium-term target.
June’s annual inflation reading, published on Tuesday, was an increase from May’s figure of 1.9 per cent and in line with economists’ expectations in a Reuters poll.
Diego Iscaro, head of European economics at S&P Global Market Intelligence, said that the rise was “modest” and “not particularly worrying”.
He added that, while the ECB was likely to hold interest rates steady at its next meeting in July, “we see the door opening for a last [quarter-point] cut in September”. The central bank has halved rates to 2 per cent since last summer.
ECB president Christine Lagarde said last month that the central bank was “getting to the end of a monetary policy cycle”.
Core inflation, excluding volatile food and energy prices, remained steady at 2.3 per cent in June.
The closely watched figure for services inflation — a gauge for domestic price pressures that has remained well above the 2 per cent target for more than three years — rose to 3.3 per cent, up slightly on the 3.2 per cent it reached in May.
The euro was largely unchanged after Tuesday’s data release at $1.181.
The currency has appreciated 14 per cent against the US dollar since the start of the year, making many imports to the Eurozone cheaper and having a downward effect on wider price pressures.
Oil prices temporarily soared by up to 26 per cent after Israel began bombing Iran in June, reaching the highest level since the start of the year. However, most of those gains reversed after the US entered the conflict and brokered a ceasefire.
Market expectations for interest rate cuts were unchanged after the June inflation figures were published. Traders continued to give a roughly 10 per cent chance to a quarter-point rate cut at the ECB’s next meeting in July, according to levels implied by swaps markets.
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