By Joshua Kirby

Consumer prices rose at a faster rate in Spain this month, adding to signs that Europe's battle against inflation isn't yet won.

Spanish prices rose an average 3.8% on year in May, according to EU-harmonised figures set out by national statistics agency INE on Thursday. This represents an acceleration from a month earlier, marking a third-straight month of rising inflation, and comes in above economists' expectations.

Accelerating prices in Spain join those in Germany, where inflation also picked up pace this month. The trend suggests that bumps in the road remain as the European Central Bank works to bring eurozone inflation down to sustainably lower levels. The bank is widely expected to cut its key rate at its policy meeting next week, but further cuts remain uncertain as policymakers look for further easing in inflation before they continue to loosen policy and bring down eurozone borrowing costs. France, the currency union's second-largest economy, is also expected to book rising inflation for May.

Faster inflation in Spain this month was driven by higher electricity bills, after a drop last May, and by a shallower decrease in fuel prices, INE said. The Iberian kingdom recovered more rapidly than eurozone peers from the inflation surge engendered by Russia's invasion of Ukraine in 2022, thanks in part to government subsidies of electricity bills and cuts to VAT on everyday foodstuffs. Headline inflation had fallen to just 1.6% by last June, but base effects have since seen the rate creep higher, going further beyond the ECB's 2% target.

By national standards, Spain's inflation rate increased to 3.6% in May from 3.3% in April, while core inflation--which strips out energy and most food prices--ticked higher for the first time since July last year.

That trend could continue, with food taxes set to return to normal levels in July. Inflation should nevertheless stay more or less steady over the coming months before easing again in the autumn, said Angel Talavera, an economist with Oxford Economics, in a post on X.

Write to Joshua Kirby at; @joshualeokirby

(END) Dow Jones Newswires

05-30-24 0347ET