Portuguese inflation holds at 3.3% in May as energy costs surge 13.2%, but minister insists 'people are living better'

Inflation stabilises but energy costs accelerate

Portugal's headline inflation rate held steady at 3.3% in May 2026, matching April's figure, according to the flash estimate released by the National Statistics Institute (INE) on Friday. This marks the second consecutive month above the 3% threshold after a period when the indicator hovered around 2%, the target of most central banks including the European Central Bank.

Energy products were the main driver, with prices surging an estimated 13.2% year-on-year, up from 11.7% in April. The INE noted this is the sharpest increase since December 2022, when Russia's invasion of Ukraine triggered a previous energy crisis. The current spike is attributed to disruptions in raw material distribution caused by the war in the Middle East, following US and Israeli attacks on Iran in late February and the subsequent blockade of the Strait of Hormuz.

Oil prices are above the assumptions in our March projections and, if they remain elevated, their impact on the global economy could worsen.

Food prices ease slightly

While energy costs accelerated, unprocessed food products showed a deceleration, rising 5.7% in May compared to 7.5% in April. Processed food products are estimated to have increased by 1.41%. Core inflation, which excludes unprocessed food and energy, remained unchanged at 2.2%.

The INE also reported that the Portuguese Harmonised Index of Consumer Prices registered a year-on-year change of 3.1%, down from 3.3% in the previous month. The average variation over the last twelve months is estimated at 2.5%. Definitive data for May will be published on 12 June.

Housing market hits new record

In a separate release, the INE reported that bank valuations of residential property reached a new record of €2,174 per square metre in April, up €23 from March and 16.5% higher than April 2025. The growth rate was similar to that recorded in the previous month.

Minister says wages outpacing inflation

Speaking to journalists in Santa Maria da Feira, Aveiro district, Economy and Territorial Cohesion Minister Castro Almeida acknowledged concern over inflation but argued that wage growth is running at double the rate of price increases.

In 2025 we were the third country in Europe where wages grew the most, and even in the first quarter of 2026, wages grew 6.6%. Even with inflation now elevated — at 3.3% — it is half the value of wage growth. And therefore it means that people are, despite everything, living better.

The minister stressed the need for companies to become more competitive and for work to be more productive, enabling people to earn more per hour. He acknowledged that rising petrol prices are a powerful psychological factor and that supermarket food prices rising above average inflation is very disturbing, but insisted the government must guarantee wage growth above inflation.

ECB signals possible rate hike

ECB chief economist Philip Lane indicated the central bank will likely revise its inflation forecasts upward at its June meeting due to Middle East tensions. Markets anticipate a 25 basis point increase in the deposit rate to 2.25%. Lane warned that an energy shock resulting in widespread inflation would create a serious problem.

We should revise our inflation forecasts upward in June.

Brent crude is currently trading around $90 per barrel, significantly below the peak above $125 reached since the start of the Middle East conflict, but still well above the roughly $72 level seen before the attacks on Iran.