The annual rate of inflation in countries that use the euro accelerated slightly in May, driven by an increase in the cost of services and food. Consumer prices in the eurozone rose 2.6 percent in the year to May, compared with 2.4 percent in April.
The overall inflation rate was slightly higher than economists expected. The same was true for core inflation, which excludes volatile food and energy prices, which hit 2.9 percent in May, up from 2.7 percent in April.
The May figures showed the first pick-up in headline and core inflation this year, highlighting the difficulties faced by European Central Bank authorities in the final stretch of achieving their goal of reducing inflation to 2 percent. Inflation peaked above 10 percent in 2022.
Three of the area’s largest economies, Germany, France and Spain, saw annual inflation accelerate in May.
Central bank governors will meet next week to set interest rates for the 20 countries that use the euro, when they are expected to cut. Such a move would make the ECB the first major central bank to cut rates, breaking ranks with the Federal Reserve, the Bank of England and others that have rapidly raised rates in recent years to rein in a rise in consumer prices.
The ECB has kept its main rate, known as the deposit rate, at 4 percent, the highest in its history, since September. As inflation in the eurozone has cooled and economic growth has been patchy, authorities have signaled their willingness to cut rates.
“Barring any surprise, the first rate cut in June is a fact,” François Villeroy de Galhau, governor of the Bank of France, said on Tuesday.
Oxford Economics’ Riccardo Marcelli Fabiani said the May numbers would have little bearing on what he called a “clearly communicated” decision to cut rates at the central bank’s June meeting, but noted the trend could make policymakers policymakers become cautious after that.
“The European Central Bank will be cautious and unlikely to lower interest rates at the July meeting, given the momentary break in disinflation, especially in services, and the strong wage data,” Fabiani said.