Cost of living: Eurozone inflation rises far more than expected to hit record 10.7%

The annual rate of inflation in the euro zone has hit a record high of 10.7%, again exceeding levels predicted by economists and market analysts.

The European Commission’s statistics agency Eurostat reported that food and imported industrial goods all pushed prices sharply higher in October – adding to the bloc’s energy-driven inflation crisis.

Economists had predicted the inflation figure across the 19 nations which use the single currency would rise to 10.2% from 9.9% in September.

The acceleration makes it more likely that the European Central Bank (ECB) will maintain the pace of its interest rate hikes to clamp down on inflation.

Its main deposit rate was doubled to 1.5% from 0.75% just last week through a 75 basis points hike.

It has promised further action at its next meeting in December.

What will likely concern the ECB in its deliberations is that inflation appears to be becoming more ingrained.

Underlying price growth, which filters out volatile food and fuel prices, continued to accelerate according to the Eurostat data.

It showed that Inflation excluding unprocessed food and energy accelerated to 6.4% from 6.0%.

Add to that rising wages and a recent shift in services costs and there is plenty to tackle.

There is, however, the threat that rising rates will dampen growth.

Markets have started to anticipate a slowdown in rate hikes because separate data suggests recession looms early next year.

Markets see the ECB’s deposit rate peaking at just below 2.9% in 2023.

The UK is in a similar position with a weak currency versus the historically strong US dollar also providing inflationary headwinds, as goods imported from abroad become more expensive.

The annual rate of inflation is at 10.1% but is expected to peak beyond 11%.

The Bank of England will update its forecasts this week when it reveals its latest UK interest rate decision.

Financial markets expect an increase of 75 basis points to 3% while economists believe the monetary policy committee will take Bank rate to 2.75%.