Services inflation surged 0.5pp to 3.5%, driving core inflation above forecasts and reinforcing ECB rate hike expectations.
Eurozone core inflation climbed to 2.5% in May, exceeding the 2.4% consensus, as headline inflation reached 3.2%. The increase was primarily driven by a sharp 0.5pp rise in services inflation to 3.5%, likely tied to transportation costs and airfares.
Headline inflation matched expectations, rising from 3% in April, while food inflation eased. Energy prices remained the main driver of overall inflation, though the services sector’s unexpected jump stood out in the flash estimate.
Economists suggest the services inflation spike may be narrowly focused on airfares, linked to higher jet fuel costs amid geopolitical tensions. While not yet a broad concern, the trend warrants close monitoring as inflation remains above the ECB’s 2% target.