Euro zone inflation reaches 4% in October and reinforces bet on rising interest rates
Annual index reaches the highest level in approximately three years, driven by energy and food, according to Eurostat data released on Wednesday.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM MONEY TIMES · 2 MIN
In October, annual inflation in the euro zone rose from 3.8% in September to 4.0%, reaching the highest level in approximately three years. According to Money Times, the data strengthens the scenario in which the European Central Bank may raise interest rates in December.
Eurostat, the European bloc's statistical body, released the numbers on Wednesday. According to InfoMoney, the increase followed the Reuters survey of economists, that is, it was within what some analysts had already predicted. The area covers 21 nations with the single currency, and the index applies to all of them.
The pressure came mainly from food and energy. According to Money Times, inflation in the energy sector in the euro zone reached 20%. InfoMoney highlights that the rise in prices was driven by energy, and Money Times states that the index should rise further in the coming months.
To separate the noise from the signal, economists track the underlying index, which leaves out food and energy. It was 2.5%, stable and in line with expectations, according to the two sources. The data suggests that the pressure is concentrated on more volatile items, and not spread across the entire economy.
What is at stake is the ECB's ability to contain prices without stifling activity. According to Money Times, the market should reinforce expectations of a new interest rate hike in December, and the next step will depend on how prices behave in the next readings.
What changes for the investor
In theory, expectations of higher interest rates in Europe weigh on the prices of fixed income securities and could influence the exchange rate between the euro and the dollar, in addition to the appetite for higher risk assets. For those who follow the Nasdaq and global stock markets, the point to watch is whether the rise in energy starts to appear in core inflation, as this would change the ECB's reading. The December decision remains on the radar.
Automatically translated from Portuguese.
