Annual inflation in the euro zone rose at a faster pace than expected in May, official data showed on Friday, but the European Central Bank is expected to continue cutting interest rates next week.
Consumer prices in the single currency area rose 2.6 percent in May from a year earlier, up from a 2.4 percent increase in April, according to the European Union's statistics office.
This figure is above the ECB's target of 2%.
ECB officials are likely to be disappointed with the data on core inflation, which excludes volatile energy, food, alcohol and tobacco prices and is a key indicator for the bank.
That rate rose to 2.9% in May from 2.7% in April, according to the data.
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Analysts surveyed by FactSet and Bloomberg had expected consumer prices to rise 2.5% and core inflation to remain stable.
However, analysts said the figures were unlikely to stop the ECB from cutting interest rates on June 6.
The ECB has been raising interest rates aggressively since July 2022 to curb soaring inflation, but has kept borrowing costs steady in the past few months amid growing pressure to lower rates.
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“A temporary rise in inflation would not prevent a clearly communicated rate cut in June,” said Riccardo Marcelli Fabiani, senior economist at Oxford Economics.
“However, given the temporary break in deflation, particularly in the services sector, and positive wage data, the ECB is likely to remain cautious and unlikely to cut interest rates at its July meeting,” he added.
The services sector recorded the largest price increase, rising 4.1% in May, up from 3.7% the previous month.
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Energy prices rose again by 0.3% in April after declining for months and recording a 0.6% drop in April.
Food, alcohol and tobacco price increases slowed to 2.6% in May from 2.8% the previous month.
Across the euro zone, Latvia had the lowest inflation rate in May at 0.2%, according to Eurostat data, followed by Finland, which had 0.5% inflation in May.
Belgium had the highest rate at 4.9%.
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