Research: The impact of energy shocks on inflation is weakening, and the European Central Bank is expected to maintain its current policies in July.

The final value of the June inflation report shows that with the decline in prices of commodities, fuel prices have become the main factor driving overall inflation lower. The decrease in oil prices has also lowered core inflation and service sector inflation through lower airfare prices. The easing of price pressures will give the European Central Bank reason to maintain interest rates in July. However, hawkish members of the board may still be concerned about the broader impact of energy shocks and therefore advocate for one last rate hike in September.