Eurozone inflation has fallen below the European Central Bank’s (ECB) 2% target for the first time in seven months.

Eurostat confirmed on Wednesday that the consumer prices index dropped to 1.9% in May, down from 2.2% in April, in line with earlier estimates. A year earlier, the rate stood at 2.6%.

Meanwhile, annual inflation in the European Union came in at 2.2% in May, down from 2.4% in April and 2.7% the previous year.

The lowest annual rates were registered in Cyprus (0.4%), France (0.6%) and Ireland (1.4%). The highest annual rates were recorded in Romania (5.4%), Estonia (4.6%) and Hungary (4.5%).

Compared with April last year, annual inflation fell in fourteen member states, remained stable in one and rose in twelve.

Read more: UK inflation slows to 3.4% in May as transport costs ease

The highest contribution to the annual euro area inflation rate came from services, up 1.47 percentage points (pp), followed by food, alcohol & tobacco (+0.62 pp), non-energy industrial goods (+0.16 pp) and energy (-0.34 pp).

It comes as the European Central Bank (ECB) cut interest rates by a quarter of a percentage point for the eighth time in a year earlier this month, as the bank attempts to support the euro economy after the turmoil caused by US president Donald Trump’s trade war.

The benchmark rate on the deposit facility was reduced from 2.25% down to 2%, from a high of 4% toward the middle of 2023.

Main refinancing operations, charged when banks can borrow funds from the ECB on a weekly basis, was cut to 2.15%, from 2.4%, and the marginal lending facility, charged when banks seek overnight credit from the ECB, was cut to 2.4%, from 2.65%.

Investors are now pricing in a pause in rate cuts in July, and some conservative policymakers have also advocated for a break to give the bank a chance to reassess uncertainty and the future outlook.

ECB policymaker Robert Holzmann said that “the ECB should pause further interest rate cuts until at least September,” while board member Isabel Schnabel warned of “new shocks posing new challenges” even as disinflation remains on track.

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