Source: Sharecast
According to flash estimates from Eurostat, the statistical office of the European Union, inflation eased to 1.9% in May from 2.2% a month earlier, below consensus expectations of 2%.
It is the first time the rate has dipped below 2% - the European Central Bank’s long-term target - since September. The bank is due to meet later this week to decide whether or not to cut the cost of borrowing.
Food, alcohol and tobacco had the largest upward effect on the rate, after prices were estimated to have jumped 3.3%. In contrast, energy prices fell 3.6% in May.
Core inflation, which strips out these more volatile elements, slowed to 2.3% from 2.7%.
Among individual member states, Germany - the bloc’s biggest economy - saw inflation ease to 2.1% from 2.2%. In France the rate was 0.6%, and in both Italy and Spain it was 1.9%.
On a month-on-month basis, both headline and core inflation were 0.0%.
The euro fell back immediately after the data was published.
Eurostat also said on Tuesday that unemployment was 6.2% in April, down on March’s revised 6.3%, in line with forecasts. Across the wider EU, the rate was stable at 5.9%, while Germany reported one of the lowest rates, at 3.6%
Joshua Mahony, chief market analyst at Rostro, said: "The euro has been rolling over this morning, with the latest Eurozone inflation data providing fresh food for thought ahead of Thursday’s rate decision.
"While the Federal Reserve is hamstrung by concerns over tariff-led inflation pressures, the Eurozone has seen headline CPI drop below 2% for just the second time in four years.
"The weakness in the euro reflects the expectation that the ECB may go beyond the 50 basis points of cuts expected for the remainder of the year."
Bert Colijn, chief economist, Netherlands, at ING, said: "Despite unemployment coming in at 6.2%, an all-time low, wage growth has fallen quickly. This limits core inflation for the medium term.
"For the ECB, this means it can comfortably lower the deposit rate to 2% on Thursday and have a good debate about whether it should move rates below neutral to become accommodative for the economy."
Earlier on Tuesday the Organisation for Economic Cooperation and Development forecast growth of 1% for the European Union in 2025, and 1.2% in 2026.