Inflation in the euro zone rose to an estimated 3.2% in May due to soaring energy prices.
This was in line with expectations in a Reuters survey of economists.
Energy costs in May were the highest in terms of annual inflation, with prices rising by 10.9%, preliminary data showed. This was a slight increase from the 10.8% growth in euro area energy prices recorded in the previous month.
Services inflation rose to 3.5% from 3% in April, while food, alcohol and tobacco prices fell to 2% from 2.4% the previous month.
Inflation rates also varied widely across individual markets. In Germany, Europe’s largest economy, the annual inflation rate fell to 2.7% in May from 2.9% in April. But annual inflation in Greece and Lithuania exceeded 5% last month. In France, annual inflation rose to 2.8% in May from 2.5% in April.
Tuesday’s print showed Europe’s inflation rate continues to rise above the European Central Bank’s 2% target as oil and gas prices remain elevated due to the war between the United States and Iran.
Eurozone inflation rose to 3% in April from 2.6% in March. Before the outbreak of the Iran conflict, inflation in the euro zone was below the 2% threshold.
As a major net energy importer, Europe is particularly vulnerable to energy shocks.
Markets currently price in a 94% chance that the ECB will raise key interest rates by 25 basis points at its Governing Council meeting later this month, according to LSEG data.
After data release, EUR Against the dollar, it was flat at around $1.164. Germany’s interest rate 10 year bondwidely seen as the euro zone benchmark, fell by 6 basis points.
