European markets received a double dose of cautious signals on Thursday, as final German inflation data matched expectations, while a key ECB official warned against premature rate predictions. Germany’s Harmonised Index of Consumer Prices (HICP) for May was confirmed at 2.7% year-on-year, identical to the preliminary estimate and market forecasts. The Federal Statistical Office (Destatis) release showed a month-on-month rise of 0.2%, driven by sticky services prices and lingering food costs, even as energy prices exerted downward pressure.
Hours later, ECB Governing Council member Pierre Kocher stated it remains “too early” to predict the outcome of the July monetary policy meeting. He stressed that the central bank’s decisions will be strictly data-dependent, highlighting ongoing uncertainty about wage growth and services inflation. The ECB has already lowered its deposit rate twice in 2025, bringing it to 3.25%, but markets had priced a roughly 60% chance of another quarter-point cut in July.
Kocher’s remarks, combined with the steady German inflation print, reinforce the narrative that the ECB’s easing cycle is far from automatic. With core inflation still elevated, policymakers face a balancing act between supporting the sluggish eurozone economy and ensuring price stability returns to the 2% target. The euro and German Bund yields showed limited immediate reaction, but analysts warn that any upside surprise in incoming data could quickly unwind rate-cut bets.
