Eurozone News
LAST UPDATE: June 30, 2025
ECB to react forcefully when inflation is too high or low
The ECB updated its five-year strategy to commit to strong and persistent policy action when inflation deviates significantly—either up or down—from its 2% target, citing lessons from past volatility .
Insight
This shift underscores a more proactive stance, enhancing credibility on both inflationary and deflationary risks. It signals the ECB’s preparedness to tighten or ease aggressively, improving predictability amid global uncertainties.
Euro zone business lending growth stalls amid uncertainty
Business lending in the euro area stagnated in May, rising 2.5% YoY (down from 2.6%), with a net €‑2 billion in new monthly loans—the first contraction in over a year—indicating that rate cuts haven’t spurred investment amid trade volatility .
Insight
The stagnation in business credit highlights persistent economic reluctance even after ECB rate cuts, reflecting external pressures like trade policy volatility. It suggests limited short-term impact from monetary easing on private sector expansion.
Inflation down in three German states in June, pointing to national easing
Inflation slowed in Bavaria, Saxony, and Brandenburg in June, driven by energy and food price declines. These regional figures are seen as indicators for national CPI, which is expected to fall below 2.4%.
Insight
Lower inflation in key German states strengthens expectations of national disinflation, potentially influencing ECB’s policy decisions. It also suggests easing cost pressures for households and businesses.
Italy Inflation Unexpectedly Holds Steady Below ECB’s 2% Target
Italy’s consumer prices remained steady at 1.7% year-on-year in June—unchanged from May and below the ECB’s 2% goal. Food prices declined slightly while services inflation persisted.
Insight
Subdued inflation in Italy supports the ECB’s current policy stance, reinforcing the case for rate cuts if broader euro area price growth remains soft. It reflects weak domestic demand and moderate cost pressures.
Slovenia’s CPI rises to 2.2% year-on-year in June
Slovenia’s inflation rose to 2.2% year-on-year in June, up from 1.8% in May. This was driven by energy and housing cost increases, although food prices remained flat.
Insight
The acceleration toward the ECB’s target reflects uneven inflation dynamics in the euro zone. Slovenia may see tighter local financial conditions if upward price trends persist.
French PM set to survive no‑confidence motion but fate in balance
Prime Minister François Bayrou is expected to survive an upcoming no-confidence vote, though his position remains fragile amid ongoing political challenges. Previous motions have been defeated, but tensions over budget and social reforms persist.
Insight
Surviving the vote provides short-term stability, but the narrow margin underscores deep divisions. Bayrou’s ability to push through crucial reforms—such as pensions or labor laws—may remain constrained.
