Inflation in the Euro zone rose to 4% in October, its highest level in three years, according to a preliminary estimate released Wednesday. The figure was up from 3.8% in September and matched economists’ expectations cited in a Reuters poll.
Energy costs were the main driver. Energy inflation accelerated to 20.8% from 18.9% the previous month. October was the first time euro zone inflation had reached or exceeded 4% since September 2023, when it stood at 4.3%.
Inflation varied across the bloc’s 21 economies. Lithuania recorded the highest rate, at 6.1%, while Malta had the lowest, at 2.3%. Inflation remained above the European Central Bank’s 2% target in every euro zone country. Policymakers said underlying inflation and wages were broadly stable.
The ECB held its key interest rate at 2.5% last month, after raising it by 25 basis points in September. Before Wednesday’s data, markets had priced in a 71.8% chance of a rate increase at the bank’s final meeting of the year in December. That probability rose to more than 72% after the inflation figures were released.
The euro was up 0.6% against the U.S. dollar on Wednesday morning, while the yield on the 10-year German government bond was marginally higher. Robert Mertens, a senior global capital markets analyst at Validus Risk Management, said turmoil in the French bond market could constrain the ECB’s policy options. He added that easing political unrest in France could allow the bank to pursue a more aggressive path of rate increases.
Sources: CNBC Markets.