Euro zone inflation rose to a three-year high last month on surging food and energy costs and was set to rise further in the coming months, firming up the case for another European Central Bank (ECB) rate hike in December.
Inflation in the 21 nations sharing the euro currency rose to 4.0 per cent in October from 3.8pc a month earlier, in line with expectations in a Reuters poll of economists, as energy inflation hit 20pc, data from Eurostat, the EU’s statistics agency, showed yesterday. A more closely watched ‘core’ figure, which strips out volatile food and energy prices, meanwhile held steady at 2.5pc, in line with expectations, indicating that long-feared second-round effects have not yet materialised.
“Despite the lack of signs of second-round effects, today’s inflation print adds to the already strong case for an ECB rate hike in December, as the central bank is concerned that the longer the energy shock goes on, the higher the risks of broader inflationary pressures becoming more entrenched,” Nicola Nobile at Oxford Economics said.
Inflation has been climbing quickly above the ECB’s 2pc target this year as the US war with Iran has pushed energy costs higher, feeding through to retail prices for a bloc that imports the vast majority of its energy.
The ECB left rates unchanged last week.
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