Harmonized inflation rises in June

Latest reading: Harmonized inflation increased to 2.1% in June, following May’s 1.7%. Looking at the details of the release, prices for the hospitality sector, food and non-alcoholic beverages, and transportation rose at a quicker rate in June than in the prior month. In contrast, prices for housing grew at a more subdued pace than in May. Annual average harmonized inflation was unchanged at May's 2.4% in June. Meanwhile, consumer price inflation ticked up to 2.4% in June from the previous month's 2.3%. Finally, harmonized consumer prices rose 0.06% in June over the previous month, a smaller increase than May's 0.64% rise. June's result marked the weakest reading since February.

Outlook: Inflation is expected to hover near current levels in the remainder of the year, averaging below last year’s level in 2025 as a whole on a strong euro and cooling growth in private spending. Still, price pressures should remain above the ECB’s 2.0% target this year, partly due to recent tax relief. Beyond 2025, inflation is forecast to ease further as private consumption slows down due to weaker disposable income growth as wage and employment growth wanes. However, larger-than-expected tax cuts and looser-than-projected fiscal stances could reignite inflationary pressures.

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