Inflation across the euro area accelerated to 4% in October, its highest level since September 2023, as soaring energy costs continued to push up the cost of living. The flash estimate from Eurostat, released on Wednesday, confirmed a rise from 3.8% in September and matched economists' expectations. Prices rose 0.4% on a monthly basis.
The headline figure now stands at twice the European Central Bank's 2% target. Core inflation, which excludes volatile items like energy, food, alcohol, and tobacco, remained steady at 2.5%, underscoring that the current spike is primarily an energy-driven phenomenon.
Energy remains the main culprit
Energy prices were 20.8% higher than a year earlier, up from 18.9% in September, and climbed 1.4% in October alone. Given that energy accounts for roughly 9% of the euro area's consumption basket, this surge contributed about 1.9 percentage points to the headline rate—nearly half of the total.
Services inflation, which covers rents, restaurants, holidays, and insurance, edged up to 3.3% from 3.2%. Food, alcohol, and tobacco prices rose 1.6%, while unprocessed food inflation accelerated to 4.6% from 4%, a sign that higher energy costs are beginning to filter through to supermarket shelves. Non-energy industrial goods, such as cars and clothing, saw a modest 1.2% increase.
Italy leads the surge, Germany bucks the trend
Italy recorded the sharpest acceleration, with inflation jumping to 5.6% from 4.2% in September—the largest monthly increase in the bloc. Belgian inflation rose to 5.2%, while Finland saw a 0.7-percentage-point jump to 3.4%. Greece and Estonia each rose by half a percentage point, reaching 5.6% and 3.6%, respectively. France's rate climbed to 3.8%, and Bulgaria's to 6%.
In contrast, Germany—the euro area's largest economy—saw its inflation rate fall to 2.8% from 3.3%, thanks to a temporary cut in fuel taxes that took effect on 1 October and runs until the end of the year. Spain and Luxembourg also saw declines, while Malta recorded the lowest rate at 2.3%.
Overall, inflation accelerated in 13 of the 21 euro area member states, eased in six, and held steady in two. Lithuania still has the highest rate at 6.1%, followed by Bulgaria at 6%, with Greece and Italy tied at 5.6%.
ECB under pressure to act
The European Central Bank, which kept its deposit rate at 2.5% on 29 October, faces growing calls to raise rates again. Christine Lagarde, who has announced she will step down in February, said policymakers had discussed another increase but agreed to wait. Wednesday's data is likely to strengthen the case for a hike in December.
“This inflation print adds to the already strong case for an ECB rate hike in December,” said Nicola Nobile, chief Italy economist at Oxford Economics. He noted that economic momentum remains positive, “albeit far from stellar,” with France and Italy expected to grow only marginally in the final quarter.
Claus Vistesen and Melanie Debono at Pantheon Macroeconomics expect a 25-basis-point hike in December, followed by a final increase in March 2027. They forecast inflation to rise to 4.1% in November and 4.3% in December, peaking at 4.5% in January. Prediction markets assign about an 84% chance of a quarter-point hike at the ECB's meeting on 16–17 December.
The decision will also come as the ECB prepares for a leadership transition, with the race to replace Lagarde already underway. Meanwhile, markets were more focused on the US midterm results, which saw Democrats take control of both chambers of Congress—a development that could have implications for global energy prices and European economic policy.
