Eurozone inflation rises to 4.0% in October, highest in three years

Energy prices rose 20.8% year on year in October, up from 18.9% in September, the highest annual rate among the main components, Eurostat said. Belga reported that the October acceleration was linked to a jump in oil prices. Headline inflation reached 4.0%, the highest reading since September 2023.

Services inflation edged up to 3.3% from 3.2%. Food, alcohol and tobacco rose 1.6% against 1.3% in September, with unprocessed food at 4.6%. Non-energy industrial goods inflation ticked up to 1.2% from 1.1%.

Core inflation, which excludes energy, food, alcohol and tobacco, held at 2.5%. On the month, the harmonised index of consumer prices rose 0.4%.

ECB weighs December move

The reading strengthens the case for the ECB to raise rates again at its final policy meeting of the year in December, ING said, though muted core inflation suggests the move could be the last in the cycle.

At 4.0%, inflation is twice the ECB's 2% medium-term target and has stayed above it for eight consecutive months. The ECB's Survey of Professional Forecasters, released on 30 October, revised its 2027 inflation expectation up by 0.4 percentage points to 2.6%, mainly reflecting higher energy prices and their indirect effects.

ING said the path of headline inflation remains highly affected by the war in the Middle East and oil prices. It flagged escalating Middle East tensions, rising oil prices and low gas storage ahead of winter as risks to retail prices. With weak consumer demand, it expects companies to struggle to pass on higher costs, pointing to margin compression rather than broad price increases.

Member states diverge

Germany's rate fell to 2.8% from 3.3% and Spain's to 4.9% from 5.0%. France moved the other way, to 3.8% from 3.4%. Italy jumped to 5.6% from 4.2%. Lithuania posted the highest rate among the 21 eurozone countries at 6.1%, followed by Bulgaria at 6.0%, with Greece and Italy tied at 5.6%. Malta had the lowest at 2.3%, followed by Germany at 2.8% and Slovakia at 2.9%.

That leaves a 3.8 percentage point spread between the top and bottom national rates. The gap matters for a central bank that sets one rate for 21 countries.

What happens next

Jack Allen-Reynolds, an economist at Capital Economics, said the indirect effects of higher energy costs on food prices remain very limited at this stage, Belga reported. Energy inflation should ease slightly in November if prices stay near current levels, he said, but the impact of higher energy costs should feed through more visibly into food prices in the coming months.

Eurostat's full October figures are due on 18 November, ahead of the ECB's December meeting. With headline inflation at twice the target and energy prices still climbing, that release will show whether the surge is spreading into other prices.