Eurozone inflation accelerated to 4 percent in October, driven by a sharp rise in energy prices, reinforcing expectations that the European Central Bank may resume interest rate hikes in December despite holding rates steady this past week.
Annual inflation in the euro area accelerated from 3.8 percent in September, according to a flash estimate published by Eurostat on Nov. 4.
The increase was driven primarily by a renewed surge in energy prices, while underlying inflation remained stable.
Energy prices rose 20.8 percent year on year in October, compared with 18.9 percent in September, marking the fastest increase among the main components of inflation.
Services inflation edged up to 3.3 percent from 3.2 percent, while food, alcohol and tobacco accelerated to 1.6 percent from 1.3 percent. Non-energy industrial goods inflation increased slightly to 1.2 percent from 1.1 percent.
The closely watched core inflation measure, which excludes volatile food and energy prices, held steady at 2.5 percent, broadly in line with economists’ expectations.
Economists said the latest figures suggested that the impact of rising energy costs was beginning to spread beyond utility bills, although broader second-round effects remained limited.
“Core inflation had another modestly hot reading in October. This is still quite a distance from strong indirect effects, but the picture no longer looks very benign, and higher gas and electricity prices will start exerting influence soon,” Kamil Kovar, head of Eurozone Economics at Moody’s Analytics, said on X.
He added that the data strengthened the case for tighter monetary policy.
Analysts at the ING think tank said in its Nov. 4 market review that the inflation figures point to a rate hike from the European Central Bank (ECB) in December.
Last week, the ECB left its three key interest rates unchanged while warning that higher energy prices posed increasing risks to both inflation and economic growth.
In its Oct. 29 monetary policy decision, the ECB said energy prices had continued to rise, creating upside risks to inflation and downside risks to growth.
“While the full effects of the energy shock are still unfolding, underlying inflation has remained broadly stable so far and wages do not show a material response at this stage,” the ECB said. “The increased magnitude and duration of the energy shock, as well as the implications for indirect and second-round effects, are likely to drive up inflation and lower growth.”
Separate ECB survey findings published a day after the policy decision also pointed to mounting inflation pressures.
Four in 10 leading eurozone companies said they expected employees to seek higher wages because of the increase in the cost of living caused by the Iran war, according to the central bank’s survey.
Outside the euro area, Sweden’s central bank raised its policy rate by 25 basis points to 2 percent, which took effect on Wednesday, citing stronger economic activity and inflationary pressures stemming from supply disruptions.
The Riksbank said inflation was expected to continue rising and that additional rate increases were likely over the coming year if the economic outlook remained unchanged.
The Bank of England is due to announce its latest monetary policy decision on Nov. 5.
At its September meeting, the BoE left interest rates unchanged but warned they could rise if the Iran war continued to push up energy prices. The central bank also projected that UK inflation would exceed 4 percent early next year.
Correction: An earlier version of this article misstated the date on which Sweden’s central bank raised its policy rate. The Epoch Times regrets the error.
