Euro zone inflation reaches 4%, led by a jump in energy prices

Euro zone inflation rose to 4 percent in October, a three-year high, as energy prices climbed faster across the 21 countries that share the euro.

The EU statistics office published a flash estimate that put annual inflation at 4.0 percent, against 3.8 percent in September. Economists in a poll had expected exactly that figure. Prices also rose 0.4 percent from the month before.

What drove euro zone inflation higher

Energy led the climb. Annual energy inflation reached 20.8 percent, officials said, after 18.9 percent in September.

As a net importer of energy, Europe feels outside shocks quickly. Prices have risen steadily since the Iran war began. Energy makes up a small share of the basket by weight, yet its jump pulled the total sharply higher.

Other items moved less. Services inflation reached 3.3 percent, up from 3.2 percent. Food, alcohol and tobacco gained 1.6 percent after 1.3 percent.

Non-energy industrial goods rose 1.2 percent, against 1.1 percent in September. Core inflation, which strips out energy, food, alcohol and tobacco, stayed at 2.5 percent. Unprocessed food prices rose 4.6 percent after 4.0 percent in September.

Excluding energy alone, annual inflation held at 2.3 percent, the same as a month earlier. The euro area now has 21 members, because Bulgaria joined on January 1, 2026.

How euro zone inflation differs by country

October marked the first time since September 2023 that the rate reached or topped 4 percent. That month it stood at 4.3 percent.

Euro zone inflation varied widely by country. Lithuania posted the highest rate, 6.1 percent. Malta recorded the lowest, 2.3 percent. Every member stayed above the central bank’s 2 percent goal.

Italy reached 5.6 percent and Belgium 5.2 percent. Spain stood at 4.9 percent, France at 3.8 percent and Germany at 2.8 percent. Bulgaria, the newest member, recorded 6.0 percent. German prices actually fell 0.1 percent on the month.

Policymakers called underlying inflation and wage growth broadly stable despite the headline figure. Overall, euro zone inflation now runs at double the central bank’s 2 percent goal.

What it means for the central bank

The European Central Bank held its key rate at 2.5 percent last month. In September it had lifted rates by 25 basis points.

Just before the release, markets saw a 71.8 percent chance of another hike at the December meeting, the bank’s last of the year. After the data, that chance rose above 72 percent. In other words, the figure changed little.

Robert Mertens, a senior analyst at Validus Risk Management, said “ongoing turmoil in the French bond market is placing constraints on ECB policy”. If French political unrest eased, he said, the bank could tighten more aggressively.

The euro rose 0.6 percent against the dollar on Wednesday morning. The dollar eased against a basket of major currencies while vote counting continued in the midterm elections. Meanwhile, the 10-year German bund yield edged slightly higher.

For now, the reading leaves the central bank under pressure. Also, the statistics office plans to publish full October data on November 18.