Eurozone inflation rose to 4% in October, its highest level in more than three years, as soaring energy bills kept pushing up the cost of living across the bloc.
The flash estimate from Eurostat showed annual inflation climbing from 3.8% in September, exactly in line with the 4% economists had expected. Prices rose 0.4% in October alone compared with the previous month.
It is the highest reading since September 2023, when inflation ran at 4.3%. It also means prices are now rising at twice the pace of the European Central Bank’s 2% target.
Core inflation, which strips out energy, food, alcohol and tobacco because their prices swing sharply from month to month, held steady at 2.5%. That also matched forecasts.
The gap between the two figures tells the story of the month. Energy is doing most of the damage, while underlying price pressure is, for now, standing still.
So where did prices rise fastest, and what does it mean for the ECB’s next move?
What pushed eurozone inflation higher in October?
Energy, once again. Energy prices were 20.8% higher than a year earlier, up from 18.9% in September, and climbed 1.4% in October alone.
Energy carries a weight of about 9% in the euro area shopping basket. At a 20.8% annual rate, it added roughly 1.9 percentage points to the 4% headline figure, almost half of the total.
Services inflation, which covers items such as rents, restaurants, holidays and insurance, edged up to 3.3% from 3.2%. Services make up close to half of the basket, so even small moves there matter for the overall rate.
Food, alcohol and tobacco prices rose 1.6%, up from 1.3%. Inflation in unprocessed food, such as fresh fruit, vegetables and meat, accelerated to 4.6% from 4%, a sign that the energy shock is now reaching supermarket shelves.
Non-energy industrial goods, which include cars, clothing and household appliances, rose 1.2%, up slightly from 1.1%.
Which countries saw the biggest increases?
Italy, by a wide margin.
Italian inflation jumped to 5.6% from 4.2% in September, the largest increase in the euro area. Italian prices rose 1.2% in a single month, also the biggest monthly rise in the bloc.
National figures published on Friday had already pointed to the jump, driven largely by regulated energy tariffs.
Belgium followed, with inflation rising to 5.2% from 4.5%. Finland also saw a 0.7-percentage-point increase, to 3.4% from 2.7%.
Inflation in Greece and Estonia both rose by half a percentage point, to 5.6% and 3.6%, respectively. In France, inflation climbed to 3.8% from 3.4%, while Bulgaria’s rate rose to 6% from 5.6%.
In Portugal, inflation reached 3.9%, up from 3.6%.
Overall, inflation accelerated in 13 of the euro area’s 21 member countries, eased in six and held steady in two.
Where is inflation highest in the eurozone?
Lithuania still has the highest rate at 6.1%, unchanged from September. Bulgaria, which joined the euro on 1 January 2026, follows at 6%.
Greece and Italy are tied at 5.6%, ahead of Cyprus at 5.4% and Belgium at 5.2%.
Six countries now have inflation of 5% or more. Ten are at or above the 4% euro area average.
At the other end, Malta has the lowest rate at 2.3%, followed by Germany at 2.8% and Slovakia at 2.9%.
Why did inflation fall in Germany?
Germany was the main exception. Its inflation rate dropped to 2.8% from 3.3%, and prices fell 0.1% compared with September.
The main reason is a cut in fuel taxes that took effect on 1 October and runs until the end of the year.
Inflation also eased in Spain, to 4.9% from 5%, and in Luxembourg, to 4.9% from 5.2%. Austria, Malta and Slovakia saw small declines.
That matters for the whole bloc. Germany is the euro area’s largest economy, and its tax cut kept the average lower than it would otherwise have been.
What does it mean for the ECB?
The ECB kept its deposit facility rate at 2.5% on 29 October, after raising it in June and September. Christine Lagarde said policymakers had discussed another increase but agreed unanimously to wait.
Wednesday’s figures offer little reason to change course.
Headline inflation is twice the target and still rising, while core inflation, which policymakers watch for signs that energy costs are spreading to wages and other prices, has not moved.
“This inflation print adds to the already strong case for an ECB rate hike in December,” Nicola Nobile, chief Italy economist at Oxford Economics, said in emailed comments.
He added that the economy’s momentum remains positive, “albeit far from stellar”, with France and Italy expected to grow marginally at best in the final quarter of the year.
Claus Vistesen and Melanie Debono, economists at Pantheon Macroeconomics, expect a 25-basis-point hike in December, followed by a final increase in March 2027.
“The Bank will need to raise its inflation forecasts further in December, supporting a hike,” they said in a note on Wednesday.
They expect inflation to rise to 4.1% in November and 4.3% in December, before peaking at 4.5% in January.
Prediction markets assign about an 84% chance of a quarter-point hike at the ECB’s meeting on 16 and 17 December, which will also bring new staff projections.
Germany’s two-year bond yield, which is particularly sensitive to ECB rate expectations, rose 2 basis points to 3.05%.
The decision will also come as the ECB prepares for a change at the top, after Lagarde announced she will step down in February, nine months before her term ends.
How did markets react?
The inflation figures did little to move markets, which were driven instead by the result of the US midterm elections.
Democrats won control of both chambers of Congress, a result investors read as a brake on Donald Trump’s spending plans. That pushed US Treasury yields lower and weakened the dollar.
By 11:20 CET, the Euro Stoxx 50 was up 1.5% and Germany’s DAX gained 1.1%, while Spain’s IBEX 35 jumped 2.2%.
The euro gained 0.6% to $1.1262. Gold rose 3% to $4,046 an ounce, and silver climbed 4.8% to $52.17.
European government bonds followed US Treasuries higher. Italy’s 10-year yield fell 7 basis points to 4.40%, and France’s fell 7 basis points to 4.87%, while Germany’s 10-year Bund yield slipped to 3.31%.
Energy explains almost half of October’s inflation rate. Whether it stays in household energy bills or starts showing up in rents, wages and restaurant menus may decide how far the ECB has to go.