Inflation in the euro area rises to 4.0 percent

The inflation rate in the euro area rose to its highest level in more than three years in October.

In a year-on-year comparison, consumer prices rose by 4.0 percent, as the EU statistics office Eurostat announced based on preliminary data. Experts surveyed by Reuters had also expected a figure of 4.0 percent. In September it was still 3.8 percent.

The number one prize winner is energy: it rose by 20.8 percent in the eurozone compared to the same month last year. In September the rate of increase was 18.9 percent. Services now rose by 3.3 percent, prices for food, alcohol and tobacco by 1.6 percent compared to the same month last year.

Will inflation only ease from April 2027?

Inflation rates of four percent could continue to accompany us in the coming months given the unresolved Iran conflict, comments Stephanie Schoenwald from the state-owned KfW Bank. “A noticeable decrease in price inflation is only expected in the second quarter of 2027, as then low prices for energy goods on a comparative basis will fall,” said Schoenwald.

In Germany, inflation had recently weakened somewhat due to the fuel discount at the pumps. In Europe's largest economy, goods and services for consumers cost 2.8 percent more in October than a year earlier. Lithuania is currently struggling with the highest inflation rate in the euro zone. According to EU statisticians, inflation here was 6.1 percent in October.

Far from the two percent target

The European Central Bank (ECB) is aiming for an inflation rate of 2.0 percent for the euro area in the medium term. Last week, the central bankers led by President Christine Lagarde refrained from raising interest rates again. The deposit interest rate, which is important for banks and savers, is currently 2.5 percent. However, stock market professionals assume that key interest rates could rise at the last meeting of the ECB leadership shortly before Christmas.

Signals in this direction recently came from Bundesbank chief Joachim Nagel. "From today's perspective, an interest rate increase in December is very likely necessary," he said in a speech in Berlin on Tuesday evening.

The ECB Council decided not to take another interest rate step at its meeting last week because there have so far been few signs of second-round effects such as sharp increases in wage demands. However, the inflation outlook has recently deteriorated, said Nagel. The main reason for the increase in consumer prices is the rise in energy prices due to the conflicts in the Middle East.