Core pressures remain contained and the ECB has dialled back the urgency Euro area inflation surprised to the upside in September, with the main national figures all coming in above expectations. We raise our tracking estimate for the aggregate headline HICP rate up to 3.8%, which would represent the highest reading since September 2023, and a sharp acceleration from 3.2% in August. However, the increase remains primarily an energy story, with core and services pressures still broadly contained. Indeed, despite the uptick in headline inflation, the bar for an October ECB rate hike has moved higher after a more measured tone from President Lagarde earlier this week and the recent retracement in gas prices.
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