Eurozone inflation: Still trying to climb
Summary
- Eurozone inflation increased to 3.2% in May from 3.0% in April, driven by a 10.9% rise in energy costs and a 3.5% increase in service prices, according to Eurostat.
- Core inflation also rose to 2.5% from 2.2% in April, indicating broader price pressures in the economy and complicating the ECB's inflation target.
- Investors anticipate a 25 basis point interest rate hike at the ECB's June 11 meeting, with potential for one or two additional hikes in the fall.
- The ECB faces the challenge of balancing inflation control with economic growth support, as Europe's economic outlook weakens and industrial sector struggles persist.
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Automatic translation: Originally published in Finnish 02/06/2026, 09:49 GMT. Give feedback here.
Eurozone inflation accelerated to 3.2% in May from 3.0% in April, as energy costs and service prices rose sharply. The figure released by Eurostat on Tuesday reinforces expectations of an interest rate hike by the European Central Bank later this month.
EZ: Inflation components
Source: LSEG
The acceleration in inflation was particularly driven by a 10.9% increase in energy costs and a 3.5% rise in service prices. From the ECB's perspective, it is concerning that, in addition to services, core inflation also accelerated to 2.5% from 2.2% in April. This suggests that price pressures are spreading more widely throughout the economy and the inflation target is moving further away.
From an investor's perspective, the figures did not bring any major surprises, as interest rate expectations already almost fully price in a 25 basis point rate hike for the June 11 meeting, and one or two additional hikes are expected for the fall. The central bank is unlikely to have the leeway for at least two additional hikes, and the ECB's challenge is to balance curbing inflation with supporting economic growth. Unlike, for example, in 2022, monetary policy tightening is likely to remain moderate now, as the economic outlook has weakened. As a net energy importer, Europe suffers from high prices, and the industrial sector is already struggling with, among other things, US tariffs. The ECB's room for maneuver has therefore also decreased.
