Eurozone inflation increased in May, strengthening case for ECB rate hike in World Economy News 03/06/2026 Eurozone inflation came in at 3.2% year-on-year in May, from 3.0% YoY in April. This is the highest level since September 2023 but still broadly in line with the ECB’s baseline scenario from March. Core inflation increased to 2.5% YoY, from 2.2% YoY in April. A week ahead of the next ECB meeting, this is the expected uptick in inflation that will motivate the central bank to decide on an ‘insurance’ hike. Inflation to increase further, but only gradually and moderately With the war in the Middle East entering its fourth month, the energy price shock has become more permanent – even though oil prices are actually lower than what many had pencilled in for a more adverse scenario regarding the length of the war. This is also why there won’t be any automatic shift in inflation and growth scenarios at the ECB’s meeting next week. Nevertheless, for inflation in the eurozone, the only way is currently up. Not a sharp up but a rather moderate and gradual lift. While knock-on effects from higher energy prices on other prices, like transportation and food, will be hard to avoid, the latest survey-based inflation expectations have come down a bit. Selling price expectations in both industry and services, but also the ECB’s own longer-term consumer inflation expectations, all dropped slightly in May. Definitely not enough to give an all-clear but surely sufficient to support our view of only a gradual and limited increase in inflation over the coming months. Reasons for this view are still the absence of substantial fiscal support against higher energy prices (compared with 2022) and much lower saving ratios than in 2022. In short, the pass-through of higher energy and input prices to final consumption will be limited due to a lack of ability and willingness of consumers to actually pay for these higher prices. ECB to hike next week, but forget about the 2022 comparison Th