Oil prices hit Europe hard, inflation sweeps major economies

Driven by a new surge in the energy market, the inflation rates of major European economies have soared to their highest levels in years, with Germany, France, Italy, and Spain all reporting September inflation data above analysts' expectations. Among them, Spain's inflation rate reached 5%, the highest since 2023. Fuel costs remain the main driver and are expected to push the overall eurozone inflation rate towards 4% later this year. Although economists forecast that the eurozone's inflation rate for September across the 21 countries would be 3.7%, multiple countries this week reported figures above expectations, increasing the risk of further upward inflation pressure. The market generally believes that a rebound in inflation may eventually lead to further interest rate hikes. However, investors’ bets on another European Central Bank rate hike in October have actually declined, mainly because the current inflation shock is still largely concentrated in the energy sector. European Central Bank President Lagarde also stated that the global bond market sell-off will help contain price pressures.