Annual inflation in the euro area rose to 4.0% in October, up from 3.8% in September, according to the flash estimate published by Eurostat on Wednesday. It is the highest rate recorded in the bloc in more than three years. Month on month, prices rose 0.4%.
The figure is striking less for its size than for its composition. Almost the entire increase comes from a single category, and the rest of the index has barely moved.
Energy carries the index almost alone
Energy prices rose 20.8% over twelve months, up from 18.9% in September, and 1.4% in the month alone. With a weight of about 9% in the basket Eurostat uses, that increase accounts for roughly 1.9 percentage points of the 4.0% headline — nearly half the index.
The other categories shifted little:
- services: 3.3%, up from 3.2% in September;
- food, alcohol and tobacco: 1.6%, up from 1.3%;
- unprocessed food: 4.6%, up from 4.0%;
- non-energy industrial goods: 1.2%, up from 1.1%.
Core inflation, which strips out energy and food and is the measure central banks watch for more lasting price pressure, came in at 2.5%, the same level as September. It is the third reading in a row without a change on that measure — a sign that the shock, so far, is concentrated in the energy bill and has not spread through the rest of the economy.
Italy at 5.6%, Germany at 2.8%
The bloc-wide average hides a wide spread. Ten countries were at or above the 4.0% average, and six reached 5% or more:
- Lithuania: 6.1% (unchanged);
- Bulgaria: 6.0% (from 5.6%);
- Greece: 5.6%;
- Italy: 5.6% (from 4.2%);
- Cyprus: 5.4%;
- Belgium: 5.2% (from 4.5%).
Italy posted both the sharpest annual acceleration and the largest monthly rise in the euro area, at 1.2%. At the other end, Malta recorded the lowest rate at 2.3%, followed by Germany at 2.8% — down from 3.3% in September, mainly because of the fuel tax cut that took effect on 1 October and runs until the end of the year.
Among the largest economies, Spain came in at 4.9% (from 5.0%), France at 3.8% (from 3.4%) and Portugal at 3.9% (from 3.6%). Luxembourg recorded 4.9%, Finland 3.4%, Estonia 3.6% and Slovakia 2.9%.
What it means for interest rates
The European Central Bank (ECB) left its rates unchanged at its 29 October meeting, with the deposit rate at 2.50%, after two increases during 2026 — in June and in September. At the time it cited among the risks the conflict in the Middle East, Russia's war against Ukraine, prolonged disruptions to energy supply and renewed trade tensions between major economies.
With the October reading, market analysts have begun assigning a high probability to another rate increase at the December meeting. The core figure of 2.5%, however, is the argument used by those who favour waiting: it suggests the acceleration is not coming from domestic demand, which is precisely the part of the index higher rates act upon.
Eurostat publishes final October data later this month.
With information from Eurostat, Euronews and GMK Center.
