ECB rate hike looks nearly certain after inflation rises to three-year high
TLT•Euro zone inflation rose to 4.0% in October, its highest in three years, strengthening expectations of an ECB rate hike in December. Energy inflation reached 20%, while core inflation held at 2.5%.
1. Inflation climbs further
Euro zone inflation rose to 4.0% in October from 3.8% in September, as energy inflation reached 20%. Core inflation, which excludes food and energy, held at 2.5%.
2. December hike expected
The increase added to expectations of an ECB rate hike in December. The central bank left rates unchanged last week, but several policymakers have signalled another move is likely; markets are pricing in two to three hikes to the 2.5% deposit rate over the coming year.
3. Food prices accelerate
Non-processed food prices rose 4.6% year on year. Services inflation picked up to 3.3% from 3.2%, while industrial goods prices rose 1.2%. The ECB expects inflation to remain above 4% for much of the first half of 2027 before falling towards the low twos.
