Eurozone consumer price inflation eased to 1.9% year-on-year in May 2025, down from 2.2% in April and below market expectations of 2.0%, according to a preliminary estimate. This marks the first time inflation has fallen below the European Central Bank’s 2.0% target since September 2024, reinforcing expectations for a 25 basis point rate cut later this week - likely the final move before a pause in the current easing cycle. A key driver of the deceleration was a sharp slowdown in services inflation, which dropped to 3.2% from 4.0% in April, its lowest level since March 2022. Energy prices continued to decline, falling by 3.6% year-on-year, while inflation for non-energy industrial goods held steady at 0.6%. In contrast, prices for food, alcohol, and tobacco accelerated, rising 3.3% compared with 3.0% the previous month. Meanwhile, core inflation, which excludes volatile food and energy components, slipped to 2.3%, the lowest reading since January 2022.