Eurozone inflation spikes to 3.8%, reviving debate over ECB rate hikes

Eurostat’s provisional figures released on 2 October indicate that euro-area inflation accelerated to 3.8% in September, well above the ECB’s 2% medium-term goal. The jump was driven primarily by an 18.8% rise in energy prices, with services inflation reaching 3.2% and food, alcohol and tobacco prices also increasing. Underlying inflation, excluding volatile items, ticked up to 2.5%.

The European Central Bank responded earlier this year with two rate hikes, the latest a 25-basis-point increase in September that set the deposit facility at 2.50%. President Christine Lagarde said the Middle East conflict continues to fuel price pressures and that inflation will likely remain elevated. The Governing Council will meet on 28-29 October, with a decision due on 29 October, after Eurostat publishes detailed September data on 16 October. No further hike has been confirmed, but the new inflation reading keeps the issue front-and-center.