The Eurozone’s inflation rate dropped to 1.9% in May, exceeding expectations and falling below the European Central Bank’s target of 2%. According to Eurostat data released Tuesday, this marks a significant decline compared to the previous month’s reading of 2.2%, highlighting the ongoing downward trend. The biggest relief came from services inflation, which eased significantly to 3.2% in May, marking a three-year low and reflecting a temporary spike in April. Core inflation, excluding volatile items like energy, food, alcohol, and tobacco, also retreated to 2.3%, down from April’s 2.7%. Economists see this as evidence that the recent inflation surge was not sustained, confirming a more stable economic landscape. Capital Economics’ Jack Allen-Reynolds suggests the decline in services inflation indicates a return to normalcy after April’s unexpected surge. The European Central Bank is expected to lower interest rates by 25 basis points on Thursday, with market predictions already reflecting this action. However, despite this latest data, economists believe the ECB’s decision might remain unchanged as it has already been determined. This decline in inflation underscores the growing confidence for further rate cuts at future meetings, potentially in July. Meanwhile, the Eurozone continues to navigate economic uncertainty fueled by US President Donald Trump’s new tariff plans and his proposed “reciprocal duties,” These actions have sent shockwaves through global markets. The OECD has maintained its forecast of a 1% euro area growth rate for 2025. Furthermore, their inflation prediction for the year remains unchanged at 2.2%. Bond yields across the region saw immediate drops following the release of this data, with German and French 10-year bond yields declining. This suggests anticipation of further easing in monetary policy. As a result, the euro depreciated against the dollar by roughly 0.3% on Tuesday afternoon. This trend aligns with previous instances where positive inflation news has led to weakening currency performance.