Inflation’s back on the radar
Euro area HICP inflation climbed to 3.2% year over year in May, its hottest reading since September 2023. That’s not exactly the kind of “mission accomplished” number central bankers put on the fridge.
The bigger eyebrow-raiser was core inflation, which rose to 2.5% YoY and came in above consensus. In plain English: the sticky stuff — the prices that don’t shrug off one-off energy swings — is still refusing to behave.
Services are doing the most
Services inflation hit a 7-month high at 3.5% YoY, which matters because services tend to be stubborn. Energy pressures helped push the headline number higher too, so this wasn’t just one weird data point in a vacuum.
For the European Central Bank, this is the annoying part of the job: you want growth support, but inflation keeps showing up like an uninvited plus-one. If price pressures stay sticky, the case for faster rate cuts gets weaker, and that can ripple through bonds, banks, and rate-sensitive stocks across Europe.
Big picture
One month doesn’t make a trend, but May’s print is a reminder that inflation can still surprise to the upside when everyone is hoping for a clean glide path down. The ECB may have to keep its “patience” hat on a little longer.