Euro zone headline and core inflation accelerated in May, driven mainly by rising service costs following a widely expected interest rate cut at next week's European Central Bank (ECB) Governing Council meeting.
Preliminary data from Eurostat showed consumer prices rose 2.6 percent, better than expected, following a 2.4 percent increase in April.
Annual inflation is seen at 2.5%, far from the ECB's 2% target.
Core inflation, which excludes energy, food, alcohol and tobacco, unexpectedly accelerated to 2.9%, while forecasts remained unchanged at 2.7%.
Among the HICP components, service costs grew at a faster pace, at 4.1 percent, following a 3.7 percent increase, with the increase estimated to be the result of base effects linked to rail travel subsidies that Germany introduced last May.
At the same time, food, alcohol and tobacco price increases slowed to 2.6% from 2.8%. In contrast, energy prices rose 0.3%, reversing a 0.6% decline.
The annual rate of increase in non-energy industrial product prices slowed slightly to 0.8 percent from 0.9 percent.
The HICP rose 0.2% month-on-month in May. Final data is due to be released on June 18.
Jack Allen Reynolds, an economist at Capital Economics, said rising headline and core inflation numbers would not stop the ECB from cutting rates next week, but he said a further cut in July now seemed unlikely.
The European Central Bank is set to cut interest rates in June, but there is debate over how far the bank can ease the brakes on interest rates. economy Bert Collin, an economist at ING, said the economy was likely to strengthen for the rest of the year.
Inflation accelerated in May in all four major economies except Italy.
Germany's unified inflation rate rose to 2.8% from 2.4% in April, while Spain's rose to 3.8% from 3.4%. Similarly, France's inflation rate rose to 2.7% from 2.4%.
In contrast, Italy's inflation rate fell to 0.8% from 0.9% in April.
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Renju Jaya
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