Live Markets: Euro zone inflation: it wasn't just about energy

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02/06/2026 11:53

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EURO ZONE INFLATION: IT WASN'T JUST ABOUT ENERGY
If markets were unsure about whether the ECB was going to hike or not next week, today's euro zone inflation figures might just sway their thinking. 
 Consumer prices in the 21 nations sharing the euro accelerated to 3.2% in May from 3.0% a month earlier, well above the ECB's 2% target but in line with a Reuters poll. 
Core inflation rose to 2.5% on an annual basis, the highest since April 2025, while services inflation jumped from 3% to 3.5%.
Some analysts have suggested this shows that the second-round effects from the oil & gas price rise are starting to manifest. 
"Higher services inflation may have been largely due to Easter timing effects, in which case it would be reversed in June and would not be a concern for policymakers, but it may simply be that the energy shock is feeding through faster than we had anticipated to items such as transport and hospitality," said Andrew Kenningham, chief Europe economist at Capital Economics. 
Citi says similar. 
"While part of the bounce back in core YY inflation was due to base effects (earlier timing of spring holidays vs 2025), sequential growth in core HICP also accelerated...potentially supporting the idea of second-round effects already materializing," Citi economist Giada Giani said. 
Market futures now imply an over 95% chance of a rate hike next week, with a second fully priced in by October. 
But JPMAM  global market analyst Zara Nokes thinks one might be enough. 
"With its single mandate, the ECB is likely to remain firmly focused on upside inflation risks for now. The ECB appears determined to underscore its commitment to returning inflation to target," Nokes said. 
"That said, if the economy evolves as we expect – with activity remaining sluggish – the ECB’s hiking cycle may ultimately prove to be ‘one and done’."
(Samuel Indyk)
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EARLIER ON LIVE MARKETS: 
JAPAN'S NIKKEI SEEN NEARING NEAR-TERM PEAK? CLICK HERE
ONE EXPLANATION FOR STERLING RESILIENCE CLICK HERE
TECH, MINERS LEAD EUROPE HIGHER CLICK HERE
EUROPE BEFORE THE BELL: FUTURES POINT TO STRONG START CLICK HERE
NVIDIA CHIEF TO ASIA: 'WE'RE STILL SUPPLY CONSTRAINED' CLICK HERE
     

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UK seeing a sharp increase in inflows https://www.reuters.com/graphics/GLOBAL-FOREX/gdpzaxnakvw/chart.png