Eurozone inflation exceeded expectations in April, but the European Central Bank is still expected to proceed with a rate cut in June.

Inflation in the Eurozone held steady at 2.2% in April, slightly above expectations for a 2.1% increase.

Core inflation—which excludes volatile food and energy prices—rose to 2.7% from 2.4% in March, surpassing forecasts of a 2.5% gain. The rise was largely driven by higher services prices, which offset the expected relief from lower energy costs.

Despite the stronger-than-anticipated inflation readings, the European Central Bank is still expected to proceed with a rate cut at its June policy meeting, aiming to strengthen safeguards against the potential economic fallout from escalating global trade tensions.

Market expectations for a rate cut at the June 5 meeting stand at 85%, with another cut anticipated by year-end. This indicates that the ECB is likely to prioritize supporting sluggish economic growth and mitigating risks from the U.S.–China trade conflict, rather than reacting to short-term inflation surprises.

However, some ECB hawks may argue for a more cautious stance until there is clearer evidence that inflation is sustainably aligned with the ECB’s 2% target. Still, the recent shift in the ECB’s tone—from aiming to reach 2% inflation by 2026 to suggesting the target may already have been achieved—could provide policymakers more flexibility in navigating the current economic crosswinds.