Eurozone: inflation estimated at 4 per cent year-on-year in October, up from 3.8 per cent

Last week the ECB left interest rates unchanged, but a long list of policymakers, including the influential governors of the German and Italian central banks, have already indicated that further action in December is now likely.

The financial markets are forecasting between two and three increases in the ECB’s deposit rate – currently at 2.5 per cent – over the course of the coming year, with expectations changing frequently in line with movements in oil prices.

Inflation in services, the largest component of the consumer price index, rose to 3.3% from 3.2%, whilst prices for industrial goods increased by 1.2%, up from 1.1% the previous month. Food inflation continued to accelerate, with prices of unprocessed foodstuffs up by 4.6 per cent compared with the previous year. Today’s figures appear to confirm that energy inflation is not yet generating second-round effects, but according to analysts, this will offer only limited comfort to economic policymakers.

High energy prices, particularly for diesel and natural gas, are quickly passed on to the prices of other goods and services, causing indirect effects that are set to persist.

Meanwhile, the low levels of natural gas stocks pose a significant upside risk to heating costs, economists say.

This may not be immediately apparent from the data, but it is likely to become evident in the coming months, particularly in January, when certain goods are traditionally repriced.

The ECB now expects inflation to remain above 4 per cent for much of the first half of 2027, before falling rapidly to around 2 per cent as the higher figures from the previous year are phased out.