Euro zone inflation soared above expectations again this month, hitting a record high. This could lead to further interest rate hikes from the European Central Bank as price pressures widen.
Consumer price growth in the 19 countries that share the euro currency rose to 10.7% in October from 9.9% a month earlier, beating expectations in a Reuters poll of 10.2% growth. The high inflation growth is because inflation in Germany, Italy and France all increased more than forecast based on reports from Eurostat.
Energy prices continued to drive inflation and at the same time imported food and industrial goods all pushed prices sharply higher although services only played a minor role this time around.
The ECB has previously raised rates by a combined 200 basis points over the past three months and promised further tightening as soon as December. At the same time, the market has come to expect a slowdown in rate hikes as the recession hits and gas prices have come off their highs.
Policymakers expressed concern that underlying price growth that does not take into account food and fuel prices would also increase. This points to widening price pressures, which increases the risk that high inflation will take root.
Inflation excluding food and energy rose to 6.4% from 6.0%. Markets had been expecting a rate hike last week after ECB chief Christine Lagarde gave a gloomy outlook on economic growth.
The ECB next meets on December 15, and a range of new readings on the economy coupled with the US Federal Reserve's own policy guidance, may further guide its decision.
The Euro lost 0.30% to trade at 0.9933 against the US dollar.
