Euro zone inflation rises to three-year high
TLT•Euro zone inflation rose to 4.0% in October from 3.8% in September, while core inflation held at 2.5%. Energy costs were expected to keep inflation rising, with markets pricing two to three European Central Bank rate hikes over the coming year.
1. Inflation accelerates
Inflation in the 21 nations sharing the euro rose to 4.0% in October from 3.8% a month earlier, Eurostat data showed. The result matched economists’ expectations. Core inflation, which excludes food and energy, held at 2.5%.
2. Rate expectations and prices
Services inflation increased to 3.3% from 3.2%, industrial goods prices rose 1.2% and unprocessed food prices were up 4.6% year over year. Policymakers have signalled another rate move in December, while markets are pricing two to three hikes to the ECB’s 2.5% deposit rate over the coming year. The ECB expects inflation to remain above 4% for much of the first half of 2027 before falling towards the low twos.
