Eurozone inflation confirmed at 8-month low

The Euro Area's annual core inflation rate, a key metric excluding volatile energy, food, alcohol, and tobacco prices, dropped to 2.3% in May 2025.

This marked a significant decrease from 2.7% in April, aligning with preliminary estimates and surprisingly falling below initial market expectations of 2.5%. While still above the European Central Bank's (ECB) 2% target, this 2.3% figure represents the lowest core inflation rate since October 2021, a development that is likely to strengthen calls from dovish Governing Council members for the ECB to loosen monetary policy and address growing concerns about economic growth.

Overall, Eurozone consumer price inflation was confirmed at an eight-month low of 1.9% year-on-year in May 2025, down from 2.2% in April. This crucial dip below the ECB’s 2.0% target marks the first time since September 2024 that inflation has fallen within the central bank's desired range.

The slowdown was predominantly driven by a sharp deceleration in services inflation, which fell to 3.2% from 4.0% in April, reaching its lowest level since March 2022.

Energy prices continued their downward trend, declining by 3.6% year-on-year. Inflation for non-energy industrial goods, however, remained stable at 0.6%.

Conversely, prices for food, alcohol, and tobacco experienced a faster pace of increase, rising by 3.2% compared with 3.0% the previous month. Meanwhile, the aforementioned core inflation, which filters out food and energy, eased to 2.3%, the lowest point since January 2022.

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