Inflation rises more than expected in May in the Eurozone

Eurozone inflation rebounded in May more than expected to 2.6% year-on-year, in a setback that is not expected to affect the European Central Bank’s rate cut on Thursday.

The increase in consumer prices exceeded the bank’s 2% target.

According to analysts, inflation would reach 2.5% in May, after hitting 2.4% in April.

Core inflation, which does not include volatile energy and food prices, which is closely watched by financial markets and the European Central Bank, rose to 2.9 from 2.7% in April, according to figures published by Eurostat on Friday.

However, despite the rise in inflation, the ECB looks set to cut interest rates for the first time at its Governing Council meeting on June 6, according to recent statements by bank officials.

Eurozone consumer price inflation has fallen to a quarter since 10.6% year-on-year in October 2022, hitting an unprecedented high when energy prices rose against the backdrop of the war in Ukraine.

To cool inflation, the ECB has increased borrowing costs at a rate not seen since July 2022.

Interest rates remained unchanged at a record level since October 2023, at the expense of fragile economic growth.

The high inflation rate can be explained by the rise in the prices of services and energy.

In the services sector, prices rose 4.1% year-on-year in May, after rising 3.7% in April.

Energy prices, which fell 0.6% in April, rose 0.3% in May.

On the other hand, inflation at food prices slowed to 2.6% (-0.2 points compared to April), as well as industrial goods (0.8%, or -0.1 points), according to the European Statistical Institute.