In May, Eurozone inflation fell to 1.9%, the lowest level observed since September 2024, reflecting successful efforts to align with the ECB's target. This decrease in inflation coincides with growing uncertainties regarding the economic impact of tariffs, which may influence monetary policy decisions. The ECB is likely to lower borrowing costs in response to this improved inflation data, with an anticipated rate cut occurring this Thursday and another projected for September, aiming to bring rates down to 1.75% by year's end.
May's inflation rate dropped to 1.9%, the lowest since September 2024, marking significant progress towards the European Central Bank's target of around 2%.
The decline in inflation reflects heightened uncertainty regarding tariffs' impacts on economic activity, which may influence ECB's decisions on interest rates.
Anticipation builds that the ECB will lower borrowing costs amid improving inflation data, with forecasts suggesting another cut could follow in September.
By the end of the year, interest rates could be reduced to 1.75%, signaling ongoing adjustments in response to evolving economic conditions.
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