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Investing.com -- Consumer prices in the eurozone rose slightly in June, climbing back to the European Central Bank’s target, offering policy makers cause to pause its rate-cutting cycle.
The consumer price index (CPI) rose by 2.0% annually last month, matching the ECB’s target midpoint, accelerating marginally 1.9% in May, and in line with expectations.
Month-on-month, the reading was seen up 0.3% after coming in flat last month.
Stripping out more volatile items like food and fuel, the "core" number climbed by 2.3% in the twelve months to June, matching the level seen the prior month.
The European Central Bank has managed to align inflation with its 2% target, but the outlook remains uncertain amid ongoing fluctuations in foreign exchange and commodity markets, Governing Council member Gediminas Simkus said earlier Tuesday, Bloomberg reported.
Speaking on the sidelines of the ECB’s annual gathering in Sintra, Portugal, he cautioned that there’s uncertainty about whether current projections will hold up.
Although inflation is currently hovering around the 2% mark and ECB forecasts suggest it will remain stable through 2027, officials are grappling with persistent uncertainty.
Simkus, who also leads Lithuania’s central bank, warned that the recent surge in the euro’s value against the dollar and fluctuations in energy prices, fueled in part by tensions in the Middle East, could lead inflation to stray from the ECB’s target.
The euro recently reached 1.1808 versus the U.S. dollar, the highest since September 2021.
The European Central Bank cut interest rates last month for the eighth time in a year but indicated it would likely pause at its next meeting, citing uncertainty linked to trade tensions with the United States.