Euro Zone Inflation Surges Amid Energy Price Shocks

The European Central Bank (ECB) is under pressure to raise interest rates again after inflation jumped across the euro zone, driven by energy price shocks from the Iran war.

France's harmonised inflation rate rose to 3.4% year-on-year in September, while Italy's jumped to 4.1%, both exceeding the ECB's 2% target.

In Germany, inflation accelerated to its highest level since December 2023, reaching 3.3% year-on-year, and in Spain, the rate rose to 5% from 4.6% in August.

Markets expect four more interest rate hikes over the next year on top of two moves already made this summer, as economists warn that energy prices will remain high due to tensions in the Middle East and the approaching winter.