Eurozone inflation slowed in June, according to new data released by Eurostat, after a sharp spike earlier in the year as energy prices rose. The headline inflation rate fell to 2.8% year-on-year in June, down from 3.2% in May, and compared with expectations of around 3.0%.

Energy was the key driver of the improvement. Although energy prices still rose year-on-year, the pace cooled to 8.7% in June from 10.8% in May, helped by falling fuel costs following developments that reduced the risk of another energy shock.

Other categories also eased. Inflation in food dropped to 1.6% from 1.9%, and services inflation fell to 3.2% from 3.5%. Industrial goods excluding energy held steady at 0.9%.

Core inflation—which excludes volatile energy and food prices and is closely watched by the ECB—also retreated to 2.4% from 2.6%.

The softer inflation picture comes after national reports showed declines across major eurozone economies including France, Germany, and Italy. It further boosted the view that the ECB, which raised rates in June for the first time since 2023, may be able to avoid additional hikes when it meets next on July 23.