Inflation in the eurozone has reached 4% for the first time in three years. What is now expected of the ECB?

Inflation in the eurozone accelerated to 4% in October from 3.8% in September, according to a preliminary estimate released by Eurostat on November 4. The figure matched the consensus forecast of economists surveyed by Reuters. Inflation in the eurozone surpassed the 4% mark for the first time since September 2023, when it stood at 4.3%.

The acceleration in inflation is largely due to a sharp rise in energy prices: price growth in the energy sector accelerated from 18.9% in September to 20.8%, according to Eurostat. Additional pressure came from rising prices for unprocessed food products—inflation in this segment jumped to 4.6%. At the same time, core inflation—which excludes volatile energy and food prices—remained stable at 2.5%. As a net importer of energy, Europe is vulnerable to external shocks and has faced steadily rising prices since the start of the U.S.-Iran war in late February, according to Eurostat’s forecast.

Price trends varied significantly across the 21 eurozone economies: the highest inflation rate was recorded in Lithuania (6.1%), while the lowest was in Malta (2.3%). A stark contrast is also evident among the bloc’s leading countries: while inflation in Italy jumped sharply from 4.2% to 5.6%, in Germany—the eurozone’s largest economy—it slowed from 3.3% to 2.8%, bucking the overall trend. At the same time, in all countries of the monetary union, the rate remained above the European Central Bank’s 2% target.

CNBC notes that the latest statistics are once again drawing attention to the question of whether the European Central Bank will raise interest rates again at its final meeting of the year.

“Despite the absence of signs of secondary inflationary effects, today’s inflation data reinforce the already strong case for a ECB rate hike in December. The central bank is concerned that the longer the energy shock persists, the higher the risk that broader inflationary pressures will take hold,” economist Nicola Nobile of Oxford Economics told Reuters.

Last month, the European Central Bank kept its key interest rate at 2.5% following a 25-basis-point increase in September. Shortly before the release of the statistics on November 4, money market rates indicated a 71.8% probability of a rate hike at the December meeting, and after the data was released, investors priced in a probability of such a move at over 72%, according to CNBC.

This article was AI-translated and verified by a human editor