Euro zone inflation rose in May in new signal for ECB caution on rates

Euro zone inflation rose in May, data showed on Friday, in a sign the European Central Bank still faces a slow and uncertain journey to reach its goal of fully reining in prices.

Consumer prices in the 20 countries that share the euro rose by 2.6 per cent year on year in May, inching away from the ECB’s 2 per cent target after increases of 2.4 per cent in the previous two months, according to Eurostat’s flash estimate. More significantly, a closely watched measure of underlying inflation that excludes food, energy, alcohol and tobacco came in at 2.9 per cent from 2.7 per cent in April.

The ECB’s biggest ever streak of rate hikes has helped bring down inflation, which reached from 10 per cent in late 2022 due to the surge in energy prices in the wake of Russia’s invasion of Ukraine. The hikes have stabilized consumer inflation expectations but also choked off credit.

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