Price pressures across the euro area accelerated again in May, as the disruptions from the Strait of Hormuz blockade continued to ripple through energy markets, pushing inflation to its highest level in almost three years and cementing expectations of an imminent European Central Bank rate hike.
Euro area annual inflation rose to 3.2% in May, up from 3.0% in April, according to Eurostat's flash estimate published on Tuesday. The figure matched economists' forecasts and marked the highest inflation reading since September 2023.
Energy remained the dominant force behind the rise, with prices in the category running 10.9% higher than a year earlier, barely changed from 10.8% in April.
More troubling for policymakers was the behaviour of services inflation, the measure the Governing Council watches most closely for signs of homegrown price pressure.
It accelerated to 3.5% from 3.0%, a jump that will concern Frankfurt far more than the headline figure, since it suggests the energy shock is beginning to seep into the wider economy.
