Annual inflation in the eurozone ticked back up in May, official data showed Friday, but the setback was seen as temporary and unlikely to deter the European Central Bank from cutting interest rates next week.
The data will however weigh on the ECB's moves in July and beyond, reinforcing expectations that the bank's decision on June 6 will not kickstart a rapid rate-cutting campaign.
Consumer prices in the single currency area rose faster than expected to 2.6 per cent in May from a year earlier, up from April's 2.4-per cent rate, the EU's statistics agency said.
The figure is above the ECB's two-per cent target.
ECB officials will be disappointed by the data for core inflation, which strips out volatile energy, food, alcohol and tobacco prices and a key indicator of the bank.
That rate ticked up again to 2.9 per cent in May, up from 2.7 per cent in April.
Analysts surveyed by FactSet and Bloomberg had forecast that consumer prices would rise to 2.5 per cent and predicted that core inflation would be stable.
The ECB aggressively hiked rates from July 2022 to tame soaring inflation but has frozen borrowing costs in the past few months amid growing pressure for a rate cut.
Consumer prices have been steadily falling from a peak of 10.6 per cent in October 2022 following Russia's all-out invasion of Ukraine and the subsequent impact on energy costs.
Riccardo Marcelli Fabiani, senior economist at Oxford Economics, said the May rise "was driven by temporary factors and does not mean that the deflationary process has stopped", adding that it would not "prevent the clearly-communicated" June rate cut.
"But the European Central Bank will be cautious and is unlikely to lower interest rates at the July meeting, given the momentary interruption of disinflation, especially in services, and the strong wage data," he added.
ECB moves ahead of Fed?
There is wariness at the ECB about lowering rates again in July as it prepares to reduce borrowing costs before the US Federal Reserve.
Bank of Finland governor Olli Rehn, one of 25 members of the ECB's governing council, told AFP this month that the bank was not "pre-committing to any rate path".
"The May inflation serves as a warning that next week might not mark the start of a traditional cutting cycle," Bert Colijn, senior eurozone economist at ING bank, said.
Services recorded the biggest price rise in May at 4.1 per cent, up from 3.7 per cent the previous month.
After declining for several months, energy prices rose again by 0.3 per cent in May after recording a 0.6 per cent drop in April, according to Eurostat.
Food, alcohol and tobacco price increases slowed however, to 2.6 per cent in May from 2.8 per cent the previous month.
Across the eurozone, Latvia recorded the lowest inflation rate in May, at 0.2 per cent, Eurostat data showed. Finland came second, registering an inflation rate of 0.5 per cent in May.
Belgium was the highest at 4.9 per cent.
