Europe Faces Unexpected Inflation Spike Amid Interest Rate Adjustments

Inflation in Europe increased to an annual 2.6% in May, surpassing expectations, as consumer prices remain high. Despite this rise, the European Central Bank is likely to make its first interest rate cut next week, moving ahead of the US Federal Reserve in reducing borrowing costs.

Inflation ticked up to an annual 2.6% in Europe in May, according to official figures on Friday. That's more than expected as a painful spike in consumer prices takes its time to fade away.

Yet that's unlikely to stop the European Central Bank from making a first interest rate cut next week — and moving ahead of the US Federal Reserve in lowering borrowing costs for businesses and consumers.

The official figure for the 20 countries that use the euro currency compares to 2.4% in April, according to European Union statistics agency Eurostat. Markets had expected 2.5% for May.