Euro zone inflation fell below the European Central Bank's 2% target in May, hitting a cooler-than-expected 1.9% on sharp declines in services, flash data from statistics agency Eurostat showed ...

Euro zone inflation had fallen by more than expected to 1.9% in May. Core inflation, which excludes energy, food, tobacco and alcohol prices, was unchanged at 2.3% in June.

Stock Editorial via Getty Images The European Central Bank (ECB) is widely expected to hold its main interest rate at 2% at its monetary

A stronger euro could bring inflation down more than expected, Lagarde said. The euro showed little reaction to her comments. It last traded slightly down against the dollar.

Critics of President Trump's tariff policies have been waiting for the import taxes to raise the inflation rate. That effect may be beginning.

“Further euro strength is likely to be self-defeating,” said Valentin Marinov, a currency strategist at Crédit Agricole, a French bank. Exports were already likely to weaken and become a drag on the eurozone economy because of U.S. tariffs and European government policies that would encourage more imports.

European Central Bank President Christine Lagarde said the outlook for inflation is "more uncertain than usual." She said inflation could turn out to be lower "if higher tariffs lead to lower demand for euro-area exports and induce countries with overcapacity to reroute their exports to the euro-area.