Steady inflation in Spain and rising prices in France for May are supporting calls for the European Central Bank to lift interest rates at its upcoming June meeting.
In Spain, preliminary data showed consumer prices rose 3.2% year over year in May, matching the previous month's reading and against the consensus estimate from Investing.com of 3.3%. Meanwhile, the nation's annual core inflation rate increased to 2.9% from 2.8%.
The index faced upward pressure from the transport, recreation, sporting and culture sectors, where price drops were softer than in May 2025. On the other hand, clothing and footwear pulled prices lower, while food and non-alcoholic beverages also provided downward relief, with prices remaining stable against the previous year's increases.
Concurrently, France's flash annual inflation rate for May 2026 accelerated to 2.4% from the previous month's 2.2%. While the print came in slightly below the expected 2.5%, inflation increased for the fourth straight month and reached its highest level since February 2024.
The increase was primarily fueled by rising energy costs, with gas prices surging amid the ongoing war in the Middle East.
ECB Executive Board member Isabel Schnabel said in an interview with Reuters published on Tuesday that the central bank will likely need to raise interest rates during its next Governing Council meeting starting June 10 to combat a "much more persistent" inflation shock that is "working its way through the economy."
As headline inflation in the euro area hit 3% and is expected to climb toward 4% by year-end, Schnabel warned that "looking through is no longer an option." However, she maintained that the ECB avoids pre-committing to a post-June trajectory, remaining "strictly data dependent."
Following the release of the ECB's April meeting minutes on Thursday, ING highlighted Schnabel's comments as confirmation that a June rate hike is "almost a done deal." ING's global head of macro Carsten Brzeski said a 25-basis-point "insurance rate hike" poses less risk to economic growth than the loss of credibility the ECB would face by "falling behind the curve."
"What's even more interesting is what will happen beyond the June meeting. As long as fiscal stimulus remains muted, the risk of an outright inflationary spiral remains small, making an aggressive monetary policy reaction to the current energy price shock unlikely," Brzeski added.
