Eurozone Inflation Cools to 1.9%, Strengthening Case for ECB Rate Cut

Eurozone inflation unexpectedly slowed to 1.9% in May, dipping below the 2% forecast and marking a notable decline from April’s 2.2%. The services sector led the retreat, with inflation plunging to 3.2% — its lowest level in three years — while Core inflation excluding volatile components eased to 2.3%.

Capital Economics’ Jack Allen-Reynolds attributes April’s temporary spike to Easter effects, noting the sustained downward trajectory confirms underlying disinflationary pressures. The data arrives as ECB policymakers prepare for Thursday’s anticipated 25-basis-point rate cut, with markets pricing near-certainty of the move.

While the fresh figures validate the cooling trend, analysts suggest they’re unlikely to alter the ECB’s predetermined course. The central bank’s deposit rate currently stands at 2.25%, having retreated from last year’s 4% peak.