Inflation Surge Across Eurozone Big Four Bolsters ECB June Rate Hike Case

Inflation accelerated in all four of the eurozone's largest economies in May, strengthening expectations that the European Central Bank will raise interest rates at its June meeting. Data released on May 29 showed Germany, France, Italy and Spain each posted higher annual consumer price growth, fueled primarily by energy costs. The synchronized price pressure defies dovish hopes for a pause. German harmonized inflation rose unexpectedly, while France's rate also surprised to the upside. The readings keep the ECB on course for another quarter-point hike, maintaining a tightening cycle that has persisted since 2022. Markets now assign a near-certain probability to a rate increase at the upcoming meeting, with firms pricing in additional moves later in the year as inflation stays well above the ECB's 2% target.