First inflation rise in the eurozone this year

(Patria) - Preliminary data on May inflation in the eurozone show the first acceleration of the consumer price index this year, which could be a problematic signal for the European Central Bank (ECB), which is expected to start cutting interest rates in June.

Inflation accelerated in May from April's 2.4 to 2.6 percent and was slightly above the consensus of 2.5 percent.

Core inflation, which excludes energy and food costs, accelerated from 2.7 to 2.9 percent, Nezavisne novine reports.

The services sector continues to contribute the most to higher inflation, with its price index rising 4.1 percent in May compared to 3.7 percent in the previous month.

Until this month, inflation in the eurozone had been steadily sliding towards the ECB's target of two percent, allowing the bank's leaders to announce the start of interest rate cuts from a record high of four percent.

German ten-year bonds, considered a benchmark for the cost of borrowing in the eurozone, saw their yield rise to 2.7 percent, their highest level in more than six months.

After price pressures accelerated and the eurozone returned to economic growth in the first quarter, investors expect the ECB to take a more cautious approach to lowering interest rates and that a second consecutive rate cut after June will likely not be forthcoming.