Euro zone inflation rose to an estimated 3.2% in May, driven by surging energy prices.
The print was in line with forecasts in a Reuters poll of economists.
Energy costs represented the highest annual rate of inflation in May, according to the flash data, with prices rising by 10.9% — a slight rise from the euro zone’s 10.8% energy price growth recorded the previous month.
Services inflation rose to 3.5% from 3% in April, while food, alcohol and tobacco prices cooled to 2% from 2.4% the previous month.
Inflation rates also varied drastically between individual markets. Germany, Europe’s biggest economy, saw annual inflation fall to 2.7% in May from 2.9% in April. But Greece and Lithuania’s annual inflation rates rose above 5% last month. In France, annual inflation rose from 2.5% in April to 2.8% in May.
Tuesday’s print showed inflation in Europe is continuing to rise above the European Central Bank’s 2% target as oil and gas prices remain elevated in the wake of the U.S.-Iran war.
Inflation in the euro zone jumped to 3% in April, up from 2.6% in March. Prior to the outbreak of the conflict in Iran, inflation in the euro area had dipped below the 2% threshold.
Europe is particularly vulnerable to energy shocks as a major net energy importer.
Markets are currently pricing in a 94% chance of the ECB hiking its key interest rate by 25 basis points at its meeting later this month, according to LSEG data.
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