Eurozone inflation cools to 2.8% in surprise June fall

(Sharecast News) - Eurozone inflation fell more than expected in June, driven by a sharp decline in energy costs and marking the first significant cooling of consumer prices across the single-currency bloc since January, according to official data published on Wednesday.

A flash reading showed the annual rate dropped sharply to 2.8% in June from 3.2% in May and coming in below the market consensus estimate of 3.0%.

Energy costs fell to an 8.7% annual growth rate from 10.8% in May after renewed diplomatic progress and ceasefire discussions between the US and Iran eased global oil supply anxieties.

Core inflation-which strips out volatile energy, food, alcohol, and tobacco prices-eased to 2.4% from 2.6%, signaling that underlying price pressures were starting to moderate.

The slowdown was visible across nearly all major sectors, including services, which cooled to 3.2% from 3.5%. Food, alcohol, and tobacco inflation also slipped to 1.6% from 1.9%.

European sovereign bond yields fell on the news, with the lower reading making a back-to-back interest rate hike unlikely at the ECB's upcoming policy meeting on July 23. Analysts are now predicting that central bank policymakers will vote to keep rates steady next month to further assess the economy.

Reporting by Frank Prenesti for Sharecast.com