Eurozone October inflation speeds up to 4% on energy price surge

Eurozone inflation climbed to 4% in October, marking the highest level in over three years, largely driven by soaring energy costs. The flash estimate from Eurostat showed annual inflation climbing from 3.8% in September to 4%, matching the expectations of economists. Prices rose by 0.4% in October compared to the previous month. This is the highest reading since September 2023, when inflation was at 4.3%. Inflation now stands at twice the European Central Bank's 2% target.

Core inflation, which excludes volatile items like energy, food, alcohol, and tobacco, remained steady at 2.5%. The gap between the core and headline figures highlights the impact of energy prices on the overall inflation rate. Energy costs surged by 20.8% compared to a year ago, adding roughly 1.9 percentage points to the 4% headline figure.

Italy experienced the most significant increase in inflation, reaching 5.6%, up from 4.2% in September. This surge was driven largely by regulated energy tariffs. Other countries where inflation rose notably included Belgium (5.2%), Finland (3.4%), Greece and Estonia (both 5.6%), France (3.8%), and Bulgaria (6%).

In contrast, Germany saw a drop in inflation, falling to 2.8% from 3.3%, primarily due to a recent fuel tax cut. The eurozone's inflation rate accelerated in 13 out of 21 member countries, while six countries saw a decrease, and two remained unchanged. Malta had the lowest inflation rate at 2.3%, with Germany at 2.8% and Slovakia at 2.9%.

Only six countries had inflation rates of 5% or more, with Greece, Italy, Cyprus, and Belgium tied at 5.6%. The lowest inflation rate was recorded in Malta at 2.3%, followed by Germany and Slovakia.

Germany's inflation rate decreased due to a fuel tax reduction that took effect on October 1st and is set to last until the end of the year. Despite this, the European Central Bank (ECB) decided to maintain its deposit facility rate at 2.5%. The ECB's decision to hold the rate steady comes as economists predict an increase in December, with some even expecting multiple hikes in the coming quarters.