EMU: CPI inflation extends uptrend in September

According to the first estimate, euro zone CPI inflation rose further in September. The annual rate of inflation increased from 2.6% Y/Y to 2.7% Y/Y, while the consensus was looking for a slowdown to 2.4% Y/Y. A detailed breakdown is not yet available, but energy prices probably continued to rise while there was also a VAT hike in Spain. Spanish HICP picked up from 2.7% Y/Y to 3.5% Y/Y and also Italian inflation remains stubbornly high.

Italian HICP picked up from 3.3% Y/Y to 3.4% Y/Y, while a slowdown to 2.7% Y/Y was expected. The surprise increase in inflation is an unpleasant surprise for the ECB, limiting their ability to provide more accommodation in a near future, although core inflation remains under control.