Eurozone inflation hit a three-year high of 3.8% in September (driven largely by energy at 18.8%), prompting the ECB to hold rates on October 29 while manufacturing PMI reached a multi-year high of 52.9 on AI and defense investment.

Growth remains uneven—consumer demand is weak, unemployment is sticky at 6.5%, and Q3 GDP was flat or negative in several large economies—reviving debate over another hike versus patience after the 2011 precedent.

ECB President Christine Lagarde will resign in February 2027, nine months early, to allow EU leaders to choose a successor before France’s presidential election.

A flurry of recent news from the European Union has put the eurozone economy into the spotlight: amid a background of solid growth in the manufacturing Purchasing Managers’ Index (PMI), the European Central Bank (ECB) has held off another rise in interest rates as inflation sticks at 3.8%, almost double its medium-term target of 2%. On top of this, the president of the ECB, Christine Lagarde, has announced her intention to resign in February 2027, roughly nine months earlier than her tenure is expected to end.

There is, evidently, a lot going on in this, but despite the significance of Lagarde’s announcement, the most important is the level of inflation. With the current level of inflation at 3.8%, reached in September, it’s the highest rate that the eurozone has seen in three years, having jumped from 3.2% in August, and 2.9% in July. And the rate of inflation is only continuing to accelerate, fed primarily by energy inflation rising from 14.3% in August to 18.8% in September alone, and responsible for about half of the headline inflation rate. Core inflation, however, edged up marginally from 2.4% to 2.5%, meaning that second-round effects are limited at the moment.

There are, moreover, no signs of slowing down: the Irish Times even predicts that eurozone inflation might reach 4%, while the Italian economy saw its own flash inflation reach 5.4%, with energy up to 31.4%. Headline........

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