Euro zone inflation rose to 3.2 per cent in May, bolstering the case for the European Central Bank to raise interest rates for the first time in nearly three years as it seeks to contain price pressures unleashed by the conflict in the Middle East.Tuesday’s estimate, which was in line with economists’ forecasts in a Reuters poll, was up from 3 per cent in April and marked the highest annual inflation rate since September 2023.Ireland’s inflation rate was estimated at 3.5 per cent for May in these figures. Energy was 10.9 per cent more expensive than a year before, a slight increase from April’s 10.8 per cent rise.It is the third consecutive month that price growth in the 21-country bloc has exceeded the ECB’s medium-term target of 2 per cent as oil prices remain elevated.Core inflation, which excludes volatile food and energy prices, rose by 0.3 percentage points to 2.5 per cent, slightly higher than the 2.4 per cent expected by analysts and the highest level in more than a year. The closely watched figure for services inflation jumped to 3.5 per cent from 3 per cent in April. The figure, which is a gauge for domestic price pressures, has remained well above the ECB’s medium-term 2 per cent target for more than three years.The euro was little changed immediately after the data, up 0.1 per cent against the dollar at $1.164.Top European policymakers, including the ECB’s chief economist Philip Lane and executive board member Isabel Schnabel, have in recent weeks prepared the way for a likely interest rate rise this month, as they warned that high oil prices were fuelling wider inflation.After the data, traders continued to price a probability of about 95 per cent that the ECB would raise borrowing costs by a quarter point to 2.25 per cent this month, according to levels implied by swaps contracts.Pooja Kumra, rates strategist at TD Securities, said the muted market reaction reflected the fact that traders “have already locked in” an ECB rate increase in June.The acceleration in core inflation was “more concerning” than the headline increase, added Francesco Pesole, FX strategist at ING. It “reinforces the need to stay hawkish when they hike next week”, he said. - Copyright The Financial Times Limited 2026