--- title: "European Inflation Heats Up Again! France and Spain See Prices Hit New Highs Since 2024, ECB June Rate Hike Imminent" type: "News" locale: "en" url: "https://longbridge.com/en/news/288076676.md" description: "The Middle East war has pushed up energy costs, causing inflationary pressures across the Eurozone to intensify in May, with CPI in Italy, France, and Spain all exceeding the 2% target. The data has reinforced the ECB's hawkish stance on rate hikes, with the market almost certain that it will raise the deposit rate from 2% to 2.25% on June 11, marking the first rate hike since 2023" datetime: "2026-05-29T13:32:28.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/288076676.md) - [en](https://longbridge.com/en/news/288076676.md) - [zh-HK](https://longbridge.com/zh-HK/news/288076676.md) --- # European Inflation Heats Up Again! France and Spain See Prices Hit New Highs Since 2024, ECB June Rate Hike Imminent Amid the ongoing Middle East war driving up energy costs, inflationary pressures in the Eurozone have intensified across the board, making expectations for a European Central Bank (ECB) rate hike in June increasingly certain. Inflation rates in France and Spain both rose to their highest levels since 2024 in May, while price increases in Italy also hit a new high since 2023 in the same month. These figures have further strengthened the hawkish stance of ECB officials—from Isabel Schnabel, a hawkish Governing Council member, to Chief Economist Philip Lane, who leans dovish—all signaling that **it is necessary to raise borrowing costs for the first time since 2023.** The market reaction has been clear. Investors are now almost certain that the ECB will raise the deposit rate from 2% to 2.25% on June 11, and expect another rate hike later this year. Current inflation concerns have clearly outweighed policymakers' worries about economic growth. Meanwhile, Fabio Panetta, a member of the ECB Governing Council and Governor of the Bank of Italy, acknowledged the necessity of taking action in his key annual speech on Friday, but simultaneously called against pre-locking in subsequent tightening paths, thereby preserving policy flexibility for the ECB. ## Inflation Data Accelerates Across the Board; Italy, France, and Spain All Exceed 2% Target France's Consumer Price Index (CPI) rose by 2.8% year-on-year in May, slightly below market expectations; Spain's increase reached 3.6% during the same period, in line with expectations, with both countries hitting their highest levels since 2024. Italy's inflation rate rose to 3.3% in May, also the highest point since 2023. All three datasets were released by local statistical agencies on Friday. Analysts pointed out that **rising energy costs are the main driver of this round of inflation acceleration,** a pressure closely linked to military actions launched by Trump against Iran three months ago, which subsequently disrupted energy supplies in the Middle East. From a broader macroeconomic perspective, Germany's May inflation data is also drawing significant attention. Preliminary data from regions such as North Rhine-Westphalia, Bavaria, and Baden-Württemberg suggests that price increases in Germany are likely to moderate, but will still remain far above the ECB's 2% policy target. Overall Eurozone inflation data, covering 21 member countries, will be released next week, with markets expecting it to deviate further from the 3% recorded in April. The acceleration in inflation data releases coincides with a noticeable shift in internal discussions at the ECB. The minutes from the April monetary policy meeting, released on Thursday, showed that some officials were no opposed to raising rates at that time, indicating that internal consensus for a policy pivot is quietly accumulating. If the ECB announces a rate hike at its decision meeting on June 11, it will be the first increase since September 2023, marking a clear reversal of the previous cycle of eight consecutive rate cuts. The market is currently pricing in another rate hike within the year, reflecting investors' judgment that inflation risks are overriding growth concerns. ## Panetta: Supports Action, But Rejects Pre-set Paths At the Bank of Italy's annual report press conference held in Rome on Friday, Panetta stated that the ongoing Iran war, rising inflation expectations, declining fuel inventories, and other risks of supply disruptions collectively point to the need for some action. "The forward-looking landscape seems to require a recalibration of the monetary policy stance to address the risk of persistent inflationary tensions," Panetta said. However, he simultaneously emphasized: "It remains crucial not to be bound by pre-set paths." This statement created a certain gap with the expectations of some market participants who hoped for clear signals of consecutive rate hikes, also implying that there are still divergences within the ECB regarding the subsequent pace. Panetta also warned about the risk of a wage-price spiral, but pointed out that current salary data does not show alarming signals: "Although medium-term inflation expectations face pressure, they remain firmly anchored to the target, and there are currently no signs of wage tightness." He emphasized, "Once the wage-price spiral starts, it will be harmful and costly." Panetta's remarks are expected to be his last major public statement before entering the quiet period ahead of next week's decision. ## Economic Outlook Clouded; France's Contraction Intensifies Dilemma **As inflation heats up, growth data in some economies is deteriorating, presenting the ECB with a more thorny policy environment.** Revised data released by French statistical agencies on Friday showed that the country's GDP contracted by 0.1% in the first quarter, worse than the previously reported zero growth. Leading indicators for May also showed a decline in French consumer confidence and a tendency for business activity to shrink. Regarding Italy, Panetta warned that the Iran war "has already shaken an already fragile economic outlook." He expects Italian economic activity to remain weak in the coming months, stating that "in the worst-case scenario, the economy could stagnate or even contract." He also expressed caution regarding the macroeconomic background of rising global bond yields: > "The overall picture remains fragile. 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