In brief

• Inflation in the euro area rose to 4.0% year on year in October, up from 3.8% in September.
• This is the highest reading since September 2023, driven by energy prices rising 20.8%.
• Rising inflation increases the chances that the ECB will raise interest rates in December.

Highest level in three years

Inflation in the euro area reached 4.0% year on year in October, up from 3.8% in September (Inflacja w strefie euro przyspiesza. EBC może podnieść stopy procentowe w grudniu – Puls Biznesu) (La inflación de la zona euro repunta al 4% en octubre por el encarecimiento de la energía – EL PAÍS) (Inflation im Euroraum steigt auf 4,0 Prozent – tagesschau.de). Based on preliminary data, the EU statistical office Eurostat reported that this is the highest reading since September 2023 (Hohe Energiepreise: Inflation im Euroraum steigt auf vier Prozent – DER SPIEGEL).

Energy drives prices

Energy became the most expensive category. Its prices rose 20.8% year on year, compared with 18.9% a month earlier. Industrial goods excluding energy rose 1.2%.

Pressure on the European Central Bank

Rising inflation increases the likelihood that the European Central Bank will raise interest rates at its December meeting (La inflación en la eurozona aumenta dos décimas en octubre, hasta el 4% – Expansión). According to analysts, the reading strengthens the case for such a move. The ECB had earlier warned of growing inflation risks linked to the oil price shock caused by the conflict with Iran.

Outlook

Economists expect inflation may remain high in the coming months. A clearer slowdown is not expected before the second quarter of 2027. Energy prices remain a key risk factor for businesses and households in the region.

Read also

• Inflacja w strefie euro przyspiesza, a gospodarka wyhamowuje. Przemysł wytrzymuje, ale rosną koszty