France June harmonized inflation slows to 2%, below 2.3% forecast

Preliminary June inflation data showed broader-than-expected easing across most major euro zone economies, with France, Germany and Italy all posting softer readings while Spain stood out as the only large economy where inflation did not slow. France’s harmonized inflation rate eased to 2.0% year-on-year from 2.8% in May, below the 2.3% Reuters poll forecast and in line with the ECB’s target, helped by a 5% drop in energy prices, services inflation easing to less than 2% and manufactured goods prices falling 0.9%. Germany’s inflation slowed to 2.4% from 2.7%, below a 2.5% forecast, while core inflation held at 2.5%. Italy’s EU-harmonised HICP slowed to 3.1% from 3.2%, defying forecasts for no change, while Spain’s inflation was unchanged at 3.6%, above expectations for 3.4%. The figures increase the likelihood that overall euro zone inflation, due on Wednesday, could undershoot the 3.0% June forecast in a Reuters poll and ease pressure on the European Central Bank to raise interest rates in the near term, though four sources told Reuters the case for a modest hike later remains intact.