Eurozone inflation cooled to 2.8 percent in June 2026, down from 3.2 percent in May, moving closer to the European Central Bank's 2 percent medium-term target and bolstering expectations for a policy pause.
The ECB raised rates by 25 basis points to 2.25 percent on June 11, marking the first major central bank to tighten following the outbreak of the Iran war. The bank is now expected to hold rates steady at its July 23 policy meeting. The deceleration in June exceeded economist forecasts.
Markets are looking ahead to a 25-basis-point increase to 2.5 percent in September 2026, with the median projection pointing to a first rate cut in September 2027. Geopolitical risks remain a factor as oil prices have risen again following renewed attacks in the Middle East.