Eurozone May Inflation Rises to 3.2% — Highest Since September 2023, Cementing ECB June Hike

Eurostat's flash estimate released June 2, 2026 showed euro area annual inflation accelerated to 3.2% in May 2026, up from 3.0% in April — the highest reading since September 2023 and above analyst consensus of 3.1%. The breakdown showed energy at +10.9% year-on-year (driven by Middle East tensions affecting oil and gas markets), services rising to 3.5% (from 3.0%), food at +2.0%, and non-energy industrial goods at +0.9%. Core inflation excluding energy and food rose to 2.5% from 2.2% — the highest in over a year and well above expectations, signalling that energy-driven price pressures are beginning to feed into the broader economy. The reading almost certainly locked in a 25 basis point rate hike by the European Central Bank at its June 11 governing council meeting, which would lift the ECB deposit facility rate from 2.00% to 2.25% — with markets pricing a 91-99% probability of action. ECB Chief Economist Philip Lane had stated the bank 'cannot look through' the energy-driven inflation rebound. Adding complexity, preliminary data also showed eurozone Q1 2026 GDP contracted -0.2% quarter-on-quarter — raising stagflationary risks if the ECB tightens into a weakening economy.