Italy Inflation Unexpectedly Holds Steady Below 2% ECB Goal

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(Bloomberg) — Italian inflation unexpectedly stayed unchanged in June, holding below the European Central Bank’s 2% target for a second month.

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Consumer prices rose 1.7% from a year ago, matching May’s 1.7% advance, the national statistics institute said Monday. Economists in a Bloomberg survey had expected a reading of 1.8%.

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The data follow upticks in France and Spain, though ECB officials remain confident that price growth will settle at their goal in 2025. They’ve already lowered interest rates eight times in the space of a year, and markets aren’t ruling out further easing as the 20-nation economy struggles under the weight of global tariff disruption.

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Inflation numbers from Germany are due later Monday and are likely to reveal a slightly higher headline rate of 2.2%. Reports on Monday from the country’s federal regions, however, suggest risks of it remaining at 2.1%, Bloomberg Economics’s Martin Ademmer cautioned.

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Eurostat will publish inflation figures for the euro area as a whole on Monday. Economists anticipate a small increase, to 2%.

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In Italy, prices were boosted by food, housing, water and electricity. Central-bank Governor Fabio Panetta has said inflation is almost fully tamed but that monetary policy is being conducted under conditions of increasing uncertainty.

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What Bloomberg Economics Says…

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“Headline HICP inflation in Italy remained stable, reinforcing the ECB’s confidence that the disinflation process remains on track. A temporary acceleration in energy prices, driven by war in the Middle East, pushed fuel costs higher, but that was largely offset by a decline in utility bills. Services inflation also held steady, leaving core inflation unchanged at 1.9%.”

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—Simona Delle Chiaie, economist. Click here for full REACT

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ECB President Christine Lagarde has signaled that easing is nearing its end, saying policymakers are well placed to tackle challenges ranging from jolts to global trade to the tensions in the Middle East.

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While uncertainty points to more muted economic growth, the implications for inflation are “less clear-cut,” with potential upside and downside risks, Irish central-bank chief Gabriel Makhlouf said in remarks published Monday.

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“Over the near-to-medium term, however, the central outlook for inflation in the euro area as a whole is broadly favorable, with indications suggesting that inflation will settle at around the Governing Council’s 2% medium-term target,” he said.

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—With assistance from Harumi Ichikura, Joel Rinneby and Olivia Fletcher.

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(Updates with Irish central-bank governor in last two paragraphs.)

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