- This will create a headache for interest rate setters in the single currency bloc
- Increase unlikely to deter ECB from cutting rates by a quarter percentage point
Headache: ECB president Christine Lagarde
Eurozone inflation rose to a higher-than-expected 2.6 per cent last month, according to official figures.
This will create a headache for interest rate setters – including European Central Bank (ECB) president Christine Lagarde – in the single currency bloc.
The increase from 2.4 per cent in April is seen as unlikely to deter the ECB from cutting rates by a quarter percentage point on Thursday.
But economists had expected a figure of 2.5 per cent.
And stickier-than-expected inflation will make it less likely that the ECB follows a June rate cut with another in July.
Bert Colijn at ING Bank said: ‘While the European Central Bank seems set to lower rates next week, the debate over how much the ECB can release the brakes on the economy over the rest of the year will be heated.’