Euro-area flash inflation: Double trouble

Euro-area inflation is likely to keep the ECB on a gradual tightening path despite moderate wage pressure and resilient growth.

• Headline inflation rose to 4.0% year on year in October from 3.8% in September, matching consensus and standing at twice the ECB’s target.
• Energy prices increased 20.8% year on year and accounted for about half of headline inflation, while food inflation rebounded to 1.6% after unusually low readings in the third quarter.
• Core inflation stayed at 2.5%, with services inflation at 3.3% and non-energy industrial goods inflation at 1.2%; monthly services price increases remained modest.
• The unemployment rate rose from 6.3% to 6.5%, labour shortages fell close to 2018 to 2019 levels, and wage growth is expected to remain around 2.5% to 3% in coming quarters.
• Euro-area GDP grew 0.4% quarter on quarter in July to September, or 0.2% excluding volatile Irish data; Spain grew 2.7% year on year, France contracted 0.1%, and Germany and Italy are tracking near 1% growth in 2026.

Takeaway: Nordea expects two further ECB rate hikes because price pressures are broadening, while weaker labour conditions should limit energy-driven wage pass-through and downside risks remain around its 1.5% growth forecast for 2027.