Euro zone inflation hits 10%: has it peaked yet?

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Euro zone inflation climbed sharply to a new high of 10% in September – flash estimates from Eurostat (region’s statistics office) indicated on Friday.

Seema Shah reacts to the inflation report

In comparison, economists had forecast an increase to 9.7% instead. Food and energy remained the primary driver but prices were seen rising in all segments.

Excluding food and energy, core inflation came in 4.8% up on a year-over-year basis. Reacting to the flash estimates, Seema Shah – Chief Global Strategist at Principal Global Investors said:

While headline inflation may start to ease as a result of base effects and volatile energy prices, with the unemployment rate at a new low, core inflation is building momentum and is likely to rise further in the coming months.

Euro zone inflation stood at 9.1% in the previous month.

What to expect from the ECB in October?

Earlier in September, the European Central Bank raised its key rates by 75 basis points (detailed here) and today’s data, Shah added, suggests the central bank will likely remain aggressive at its next policy meeting in October.

Today’s numbers will only embolden the ECB to focus solely on inflation, giving them a green light to introduce another sizeable policy rate hike even as the economy rushes headlong into a tough winter and recession.

Unemployment in Euro zone was at 6.6% in August. ECB, she noted, has a rather limited command on this supply-driven inflation. Aggressively lifting rates, therefore, increases the probability of a deeper recession.

Despite the economic news, Euronext NV ended in the green on Friday.  

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