Eurozone annual inflation accelerated to 4% in October, its highest level since September 2023, as rising energy costs pushed prices further above the European Central Bank’s 2% target.

According to the flash estimate from Eurostat, inflation rose from 3.8% in September, in line with forecasts, while consumer prices increased 0.4% over the month. Core inflation, excluding energy, food, alcohol and tobacco, remained unchanged at 2.5%, suggesting that the latest surge is largely energy-driven.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Energy Drives Nearly Half Of Inflation

Energy prices increased 20.8% year on year in October, compared with 18.9% in September. The category contributed approximately 1.9 percentage points to the overall 4% inflation rate, accounting for almost half of the increase.

Services inflation edged up to 3.3%, while food, alcohol and tobacco rose to 1.6%. Unprocessed food prices accelerated to 4.6%, indicating that higher costs are also reaching supermarket shelves. Non-energy industrial goods inflation increased slightly to 1.2%.

Cyprus Among Countries With Highest Inflation

Italy recorded the sharpest acceleration, with inflation rising to 5.6% from 4.2%. Lithuania had the highest rate at 6.1%, followed by Bulgaria at 6%. Greece and Italy reached 5.6%, Cyprus 5.4% and Belgium 5.2%.

Inflation increased in 13 of the euro area’s 21 countries, declined in six and remained unchanged in two. Malta recorded the lowest rate at 2.3%, followed by Germany at 2.8%.

Germany’s inflation eased from 3.3% to 2.8%, partly due to a temporary fuel-tax reduction introduced in October. Prices also moderated in Spain and Luxembourg.

ECB Faces Pressure Ahead Of December Meeting

The ECB kept its deposit facility rate at 2.5% on October 29. President Christine Lagarde said policymakers had considered another increase but agreed to wait.

Economists are divided on the outlook. Nicola Nobile of Oxford Economics said October’s figures strengthened the case for a December rate increase, despite modest economic growth in France and Italy.

Claus Vistesen and Melanie Debono of Pantheon Macroeconomics expect a 25-basis-point increase in December and another in March 2027. Their forecasts put inflation at 4.1% in November, 4.3% in December and 4.5% in January.

Prediction markets placed the probability of a December increase at approximately 84%. The ECB’s next meeting on December 16–17 will also include updated economic forecasts. Meanwhile, Lagarde has announced plans to step down in February, ahead of the end of her term.

Markets React To U.S. Midterm Elections

Financial markets focused more on the U.S. midterm elections than on the inflation data. Democrats won control of both chambers of Congress, prompting investors to anticipate constraints on President Donald Trump’s spending plans.

By 11:20 CET, the Euro Stoxx 50 had gained 1.5%, Germany’s DAX 1.1% and Spain’s IBEX 35 2.2%. The euro rose 0.6% to $1.1262, while gold gained 3% to $4,046 an ounce.

With energy accounting for almost half of October’s inflation rate, the ECB’s next challenge is determining whether higher costs will remain concentrated in energy or spread to wages, rents and everyday services. This will shape the scale of any further monetary tightening.