Core CPI, which excludes food and energy, was unchanged at 2.3%, matching the market estimate. Services inflation, which has been stubbornly high, rose to 3.3% from 3.2% in May.
The European Central Bank will be encouraged by the inflation report, as well as Monday’s German CPI data which showed inflation easing slightly. The ECB isn’t expected to lower rates at the July 24th meeting, but the markets have priced in a final rate cut before the end of the year.
ECB policymakers are well aware that the inflation battle isn’t over. Services inflation is well above the ECB’s 2% inflation target and there are concerns that US tariffs could still send inflation higher.
ECB President Lagarde reiterated the Bank’s cautious approach in remarks at the ECB Forum in Sintra. Lagarde said the Bank would need time to ensure that the “risks of above-target inflation have passed” and that the ECB would need to “remain vigilant”.
US ISM Manufacturing PMI expected to contract for fourth successive month
US ISM Manufacturing PMI for June, which will be released later today, is expected to contract for a fourth straight time. The market estimate stands at 48.8, following 48.5 in May, which was the weakest reading since Nov. 2024. The manufacturing sector has been hit by growing economic uncertainty, in particular President Trump’s erratic trade policies.
