Eurozone Inflation Surges to 3.8%, ECB Under Pressure to Hike Rates

The Eurozone's inflation rate surged to 3.8% in September, exceeding expectations and putting pressure on the European Central Bank (ECB) to raise interest rates.

The rise in inflation is primarily driven by fuel and natural gas costs, which have increased sharply. The closely watched 'core' figure, excluding food and fuel prices, accelerated to 2.5% from 2.4%, indicating a pick-up in services prices.

Rising energy costs are causing concerns among European governments, with some countries such as France already experiencing street protests. Subsidies have been minor so far, totaling around 0.1% of the bloc's GDP.

The ECB is likely to consider a mixed bag in its policy response, with the rise in headline inflation being worrisome but the muted increase in core figures indicating that high energy costs have yet to generate second-round impacts.