The EU and euro area see rise in annual inflation
Annual inflation in the EU rose to 3.3%, up from 3.2% in April and 1.2% year-on-year, while for the euro area, annual inflation increased to 3.2%, up from 3% in April.
Compared with April 2026, annual inflation fell in 11 member states, while it rose in 16. The lowest annual rates were registered in Sweden, Denmark and Czechia, while the highest were recorded in Romania, Bulgaria and Lithuania. Core inflation rose to 2.6%, slightly higher than the flash estimate of 2.5% in April.
Energy prices rose 10.8%, while services rose by 3.5%. Non-energy industrial goods prices climbed 0.9%, and food inflation softened to 1.9% from 2.4%.
US Federal reserve holds interest rates steady
The first meeting of Federal Reserve chair Kevin Warsh (pictured) concluded with no change in interest rates, as the committee voted unanimously to maintain rates at the same range of 3.5-3.75%. The central bank had last changed the interest rates in late 2025, when it lowered them by three-quarters of a percentage point. However, there is still a possibility of hikes ahead, with nine Fed officials see rates rising in 2026.
Warsh also mentioned an overhaul of the Fed’s operations through the implementation of five task forces. These will address the Fed’s communications, its balance sheets, its reliance on data sources, productivity and jobs, and the central bank’s inflation ‘frameworks’.
UK inflation holds steady
UK inflation held steady at 2.8% in May, slightly below expectations as economists forecasted a rise to 3%. Inflation had cooled to 2.8% back in April, due to the UK’s regulated energy price cap, although this is expected to be short-lived as the price cap is set to rise to 13% later in the summer.
The Office for National Statistics reported that transport was the main contributor to price increases, partially offset by falling food and non-alcoholic drink prices.
Gasoline prices rose by an average 0.6 pence per litre between April and May, compared with a 2.1 pence decline over the same period in 2025. The Bank of England has decided to maintain interest rates at 3.75% for now, but an interest hike seems quite likely.
This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).
