Euro-area inflation tops expectations

Inflation in the euro area accelerated more than expected in October to the highest level since 2008, marking another surprise reading that will likely prompt investors to question whether the price surge is temporary.

Consumer prices rose 4.1% in October, compared with an estimate of 3.7%, according to figures released by Luxembourg-based Eurostat on Friday. A measure stripping out volatile components such as food and energy climbed to 2.1%, a rate not seen in nearly two decades.

The figures come after the European Central Bank left its stimulus measures including emergency bond buying in place, even as President Christine Lagarde said the current phase of faster inflation “will last longer than originally expected.” Officials still expect price pressures to ease next year.

Businesses are struggling to deal with the fraying of global supply chains, which has caused the costs of parts, raw materials and shipping to soar. Energy prices, meanwhile, rose 23.5% in October, up from 17.6% a month earlier, amid a natural-gas crunch.

Financial markets are betting that inflation will force the ECB to raise interest rates in October 2022, even as policy makers maintain that such a scenario isn’t in line with their own guidance on when borrowing costs should rise.

Professional forecasters polled by the ECB also ramped up their inflation outlook for the period through 2023, though they continue to see a sharp slowdown in 2022 from the current level, according to report on Friday. The respondents expect price growth of 1.9% in 2022 and 1.7% in 2023, below the ECB’s 2% target.

©2021 Bloomberg L.P.