Inflation across the eurozone’s three largest economies decelerated in June, offering the first clear evidence that the energy-driven price surge of early 2026 is receding. France’s harmonised index fell to 1.8 per cent year on year, down from 2.4 per cent in May and back below the European Central Bank’s 2 per cent target for the first time since March. Germany recorded 2.3 per cent, a decline from 2.6 per cent, while Italy’s rate eased to 3.0 per cent from 3.2 per cent. On a monthly basis, prices were flat in Italy and fell 0.3 per cent in Germany and 0.1 per cent in France, snapping a four-month sequence of uninterrupted increases.

The primary driver was a sharp retreat in energy costs. The diplomatic accord between Washington and Tehran in mid-June, which began to normalise traffic through the Strait of Hormuz, pulled global oil prices lower. In France, energy inflation slowed to 11.2 per cent from 16.8 per cent in May; in Germany, it dropped to 3.4 per cent from 6.6 per cent, amplified by a federal fuel subsidy that expires at the end of June. Italian data showed a more mixed picture: while petrol and diesel prices decelerated on an annual basis, regulated and non-regulated energy costs accelerated, reflecting the lagged pass-through of earlier wholesale spikes.

For households, the respite is partial. Italian consumer associations calculate that the cumulative price increases of the preceding four months still impose an additional annual cost of roughly €500 for an average family, rising to nearly €1,000 according to Federconsumatori. Core inflation, which strips out volatile food and energy, remains sticky: 2.5 per cent in Germany, 1.6 per cent in Italy and France. Services inflation in Germany held at 3.1 per cent, while in Italy it dipped only marginally. Viewed from Frankfurt, the data reduce the immediate pressure on the ECB to extend its rate-hiking cycle, which began with a 25-basis-point increase in June, but they do not yet signal a durable return to price stability.

The trajectory ahead is uncertain. The expiry of Germany’s fuel subsidy on 1 July is expected to push the national inflation rate higher in the coming month. French statistical institute Insee and the Banque de France both project a re-acceleration of inflation from August, with the year-end rate reaching 2.7 per cent, as the disinflationary effect of lower oil prices fades and the shock propagates to manufactured goods. The next factual milestones are the July preliminary inflation releases, which will reveal the extent of the rebound once the German tax relief ends, and the ECB’s assessment of whether the June slowdown marks a turning point or merely a temporary lull.