This has sparked concern about whether the European Central Bank (ECB) will cut interest rates on 6 June, but it is still broadly in line with market expectations, causing speculation that it might not result in a shift in the timing of the ECB’s first rate cut in 2024.

The latest figure also masks differences between member states, with inflation standing at 5 per cent in Belgium, 2.8 per cent in Germany, 2.7 per cent in France, and just 0.8 per cent in Italy.

Core inflation, which excludes volatile fuels and food prices, also climbed to 2.9 per cent from 2.7 per cent in April. The ECB has said that interest rates, which currently stand at a high of 4 per cent, would be set at sufficiently restrictive levels for as long as necessary for a timely return of inflation to its 2 per cent target.

German government bond yields – the benchmark for eurozone borrowing costs – reached their highest in over six months after the inflation data was released.

Here are some reactions to the figures from investment managers.

Daniele Antonucci, chief investment officer at Quintet Private Bank (parent of Brown Shipley)
“The slight upside surprise in eurozone inflation is no reason for the European Central Bank to refrain from cutting rates next week. By and large, we think inflation has converged towards target to such a degree that starting to lower rates seems warranted. Forward-looking indicators suggest that pressures from demand look more normal now, while supply factors appear less of a driver, too.

“Putting it all together, this points to at least some moderation in wage growth going forward, a crucial factor for the European Central Bank to continue to cut after the first-rate reduction or two. Beyond next week’s cut, therefore, the pace of rate reduction remains quite uncertain. Our view is that the European Central Bank should be able to lower rates a couple of extra times this year, though likely not sequentially. But rapid rate reductions seem unlikely, even if the domestic economy were weaker and inflation slightly lower. This is because inflation looks sticky in the US. This means that the European Central Bank may refrain from cutting too much if the Fed doesn’t for a while longer.

“If the eurozone saw significantly lower rates versus the US, the euro would risk depreciating versus the US dollar, as exchange rates tend to be driven by interest rate differentials in the near term. If that happened, then import price inflation would accelerate in the eurozone, thus putting the achievement of the central bank’s inflation objectives at risk.”

Michael Field, European market strategist at Morningstar
“Higher-than-expected inflation in May will worry some investors, particularly as the rise was driven by services inflation, the one area that the European Central Bank had previously expressed concern about. Although an uptick like this is disconcerting, particularly after sequential downward movements, we do not believe there is any cause for panic. 

“First, and most importantly, inflation was never going to see a perfectly straight-line decline to the ECB’s targeted 2 per cent rate. The ECB had previously forecasted inflation to fall to 2.3 per cent by year end. Even though inflation is at 2.6 per cent, with seven months to go in the year, there is plenty of time for it to fall further.

“Inflation rates in May differ massively across the eurozone. In Belgium, inflation is running close to 5 per cent, while in Italy the rate is less than 1 per cent. This disparity highlights that tight labour markets are country-specific, rather than an endemic trend across the entire block, and are therefore unlikely to drive up inflation much further as the year progresses.

“There may be bumps ahead, but we’ve come a long way, and the trend is still downward. Of course, another small fall in inflation in May would have been the icing on the interest-rate cut cake, but with more than 90 per cent of economists polled expecting the ECB to cut rates in June, minor upward moves in inflation, such as this, are highly unlikely to prevent this.”

Neil Birrell, chief investment officer at Premier Miton Investors
"Eurozone inflation was marginally higher than expected in May, but probably not enough to prevent the ECB starting the interest rate cutting cycle next week. There is nothing within the numbers to give concern and the path of the fall in the consumer price index (CPI) was never going to be a smooth one, the trend remains in the correct direction and the economy could do with the support from a rate cut."