Eurozone Inflation Hits Three-Year High at 3.8%

The Eurozone's inflation rate has reached its highest level in three years, according to a flash estimate from Eurostat. In September, the annual inflation rate climbed to 3.8 per cent, up from 3.2 per cent in August and nearly double the European Central Bank's target of 2 per cent.

The main driver behind this increase was energy costs, which rose by 18.8 per cent compared to last year. Fresh food prices also increased, by 4 per cent over the month alone. Services inflation reached 3.2 per cent.

Core inflation, which strips out energy, fresh food, alcohol and tobacco, rose to 2.5 per cent from 2.4 per cent. The burden of inflation fell unevenly across the 21 member states of the euro area, with Lithuania recording the steepest increase at 6.1 per cent.

ECB President Christine Lagarde warned that government subsidies designed to shield households from energy bills were proving less temporary and less targeted than hoped. She also stated that rates would not track energy prices step for step, but investors are now pricing in as many as four more rises over the coming year.