Eurozone inflation has accelerated to a four-month high just as the European Central Bank (ECB) president Christine Lagarde prepares to cut interest rates.
The ECB is expected to become the first major central bank to bring down borrowing costs in June after nearly three years of high inflation.
Inflation rose to 2.6pc in the year to May, up from 2.4pc the previous month, Eurostat data showed.
The figure was higher than the 2.5pc expected by analysts and suggests the threat of sticky inflation still hangs over central bankers.
In France, the eurozone’s second-largest economy, inflation rose for the first time this year, up by 2.7pc in May compared with 2.4pc previously.
Stubborn inflation also plagued Germany where price rises jumped to 2.8pc last month from 2.4pc.
The services industry, which includes bars and restaurants, is a key concern for rate-setters in Frankfurt, with the closely-watched indicator rising to 4.1pc in the year to May from 3.7pc.
Despite the threat of sticky prices, traders are still almost fully pricing in the first cut to the ECB’s record high interest rates of 4pc in June.
European policymakers have clearly signalled to markets that rate cuts are imminent, with Ms Lagarde last week saying there was “a strong likelihood” of a June rate cut “if the data reinforces the confidence level that we have”.
The ECB’s first move will pave the way for the Bank of England and the Federal Reserve to follow.
It comes as the Fed’s preferred measure of inflation stagnated at 2.7pc in the year to April, in line with expectations.
Investors are largely expecting the first cut in November just after the US election.
This is similar to traders’ expectations for the Bank of England’s first move although many analysts believe it could come as soon as August.
British savers put away a record amount of cash into ISAs last month in anticipation of a looming interest rate cut, Bank of England data showed on Friday.
Families deposited an extra £11.7bn into ISAs in April, the highest since records began 25 years earlier.
The sharp increase came as the central bank is expected to begin lowering interest rates from a 16-year high.
Inflation fell to 2.3pc in April, placing it within touching distance of the Bank’s 2pc target.