In May, inflation in the euro zone rose to an estimated 3.2%, aligning with economists' forecasts. This increase was largely driven by energy prices, which surged by 10.9%, slightly up from 10.8% in April. Services inflation also saw a rise to 3.5%, while food, alcohol, and tobacco prices decreased to 2%.
Notably, inflation rates varied across different countries; Germany's inflation fell to 2.7%, while Greece and Lithuania experienced rates above 5%. France's inflation increased from 2.5% to 2.8%. The ongoing conflict in Iran has contributed to elevated oil and gas prices, pushing inflation above the European Central Bank's target of 2%.
As a result, markets are anticipating a 94% likelihood of a 25 basis point interest rate hike by the ECB in its upcoming meeting. Following the inflation data release, the euro remained stable against the dollar at approximately $1.164, while the yield on Germany's 10-year bund decreased by 6 basis points