KOF Monetary Policy Communicator for the Euro Area, June 2025

The ECB’s Governing Council further eased its monetary policy by lowering its three key ECB interest rates by 25 basis points. The Eurosystem notably revised its inflation forecast downward for the current as well as the next year. The Governing Council noted that the ongoing volatile trade policy environment is exerting downward pressures on inflation through a stronger euro and that such trade tensions entailed a higher than usual uncertainty around the ECB’s inflation outlook.

Annual HICP inflation in the euro area has further decreased to 1.9% in May from to 2.2% in April. Food price inflation continued its ascent to 3.3%, while goods inflation remained at 0.6%. Energy price inflation moved sideways at -3.6%. Services inflation fell below the March reading to 3.2%, after spiking in April due to higher-than-expected travel service prices related to the Easter holidays. Wage pressures are continuing to moderate and lower energy prices are also likely to curb inflation in the near term. Despite short-term consumer inflation expectations ticking up in April, likely due to the volatile trade environment, most measures of longer-term inflation expectations currently stand at around 2%.