Europe News

Euro zone inflation slips to 0.2% in June

Inflation in the euro zone eased in June, highlighting that the region remains vulnerable to deflation pressures.

The euro zone Consumer Price Index (CPI) rose 0.2 percent in June from a year earlier, after rising 0.3 percent in May, statistics office Eurostat said in a flash estimate. The number was in line with forecasts from analysts polled by Reuters.

Alessia Pierdomenico | Bloomberg | Getty Images

A pick-up in inflation last month had boosted hopes that price pressures were returning to a region that dipped into deflation earlier this year.

"The renewed decline in euro zone inflation in June highlighted that the European Central Bank (ECB) still has a lot of work to do to hit its inflation target in the medium term," Jennifer McKeown, senior European economist at Capital Economics, said in a note.

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The ECB has a medium-term target of year-on-year inflation of close to 2 percent.

Consumer prices rose for the first time in six months in May, helped by massive monetary stimulus from the ECB to boost inflation and economic growth in the 19-country single currency zone.

Tuesday's number was not as bad as some anticipated given weak inflation numbers on Monday from Germany, Europe's biggest economy. Consumer prices in Germany—viewed as the economic "strongman" of the euro zone—rose just 0.1 percent in June from a year earlier, compared with a 0.7 percent rise in May.

"The rate in the region is still clearly very low by international and historical standards," McKeown said.

"Note, too, that euro-zone inflation has now been below 0.5 percent for a full year, adding to the risk that low inflation may become entrenched."

The ECB has said it will continue its 1 trillion euro ($1.1 trillion) asset-purchase program well into next year to allow economic recovery and inflation to take hold.

Other data released on Tuesday showed the unemployment rate in the euro zone stood at 11.1 percent in May, unchanged from a month earlier.