Eurozone inflation ticks up again in May

Latvia is currently experiencing the lowest rate of inflation across the bloc at 0% with Finland experiencing 0.4%. 

Annual inflation across the eurozone ticked back up to 2.6% during the month of May driven by rising service prices and food prices, new data from Eurostat shows.

The rate in April stood at 2.4%, the lowest since November last year before it went back up in December. 

These figures come after the European Central Bank (ECB) cut interest rates for the first time in nearly two years earlier this month announcing a 0.25% reduction to its main lending rate.

The ECB’s aggressive monetary tightening policy sought to rein in inflation. In May 2023, the annual rate of inflation across the eurozone was running at 6.1%.

Latvia is currently experiencing the lowest rate of inflation across the bloc at 0% with Finland experiencing 0.4% and Italy 0.8%.

The highest annual rates were recorded in Romania at 5.8%, Belgium at 4.9% and Croatia at 4.3%.

Compared with April, annual inflation fell in 11 member states, remained stable in two and rose in 14. In Ireland, the rate was 2% through the harmonised index of consumer goods which allows the EU to compare similar items across different countries.

Euro area annual #inflation up to 2.6% in May 2024 https://t.co/RfWPrlrXD7 pic.twitter.com/qkNq8Xh4rR

— EU_Eurostat (@EU_Eurostat) June 18, 2024

According to Eurostat, the highest contribution to the annual euro area inflation rate came from services, followed by food, alcohol, and tobacco, and non-energy industrial goods.

Across the broader European Union, inflation is running at 2.7% — up from 2.6% in April.

The ECB is due to meet again next month to discuss interest rates. However, another rate cut is not expected.

Speaking on Tuesday, ECB vice-president Luis de Guindos said the best time to make rate decisions was coinciding with the release of the bank's updated macroeconomic projections, the next of which is slated for September.

"The projections are updated every three months, so we'll soon have new ones in September," he told Spanish state broadcaster TVE.

"Those are the most significant and interesting moments from the point of view of monetary policy, because our projections are a very important indicator when it comes to deciding the evolution of interest rates," he added.

Additional Reporting Reuters