07:20 AM EST, 11/04/2026 (MT Newswires) -- The euro area's annual inflation rate rose for the fourth consecutive month in October and reached a three-year high amid soaring energy costs, reinforcing market forecasts that the European Central Bank would hike its key rates as it ponders its final monetary policy decision for 2026. Eurozone inflation rose to 4% in October from 3.8% in September, according to Eurostat flash estimates released Wednesday. Month over month, consumer prices were 0.4% higher, after previously rising 0.6%. Both of the latest readings are consistent with the consensus estimates. Energy inflation was the top contributor to the increase in the annual rate, climbing to 20.8% during the month from the prior 18.9%. Inflation in services edged higher to 3.3% from 3.2%, while food, alcohol and tobacco prices increased by 1.6%, against the previous 1.3% gain. Excluding energy, food, alcohol and tobacco, the annual inflation rate remained at 2.5%, matching expectations. On a monthly basis, core consumer prices edged up 0.3%. "Eurozone headline inflation came in at 4.0% year-on-year in October, from 3.8% YoY in September; the highest level in three years. Core inflation, however, remained muted and unchanged at 2.5%, signalling limited spillover from higher energy prices to the rest of the economy," ING said in a quick take note. "Looking ahead, the path of headline inflation remains highly affected by the war in the Middle East and oil prices. On top of this, the start of the winter heating season, combined with low gas storage levels, is also likely to push up gas prices in the coming weeks, translating into higher retail prices at the start of next year." Among the euro area's top economies, preliminary data showed that harmonized inflation rates in France and Italy accelerated on a yearly basis. Germany and Spain, in contrast, saw declines in the harmonized index of consumer prices over the period. "For the ECB, today's inflation print actually provides both hawkish and dovish arguments. Headline inflation is clearly higher than in the ECB's base case scenario from September, strengthening the case for another rate hike. At the same time, subdued core inflation points to very limited pass-through from higher energy prices to the rest of the economy and argues against overly aggressive hikes," ING added. "Muted underlying inflationary pressure, at the same time, confirms our view that the December hike could also be the last one." The ECB is scheduled to hold its next monetary policy meeting in December.

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