Eurozone Inflation Rises Above ECB Target, Bank Expected to Maintain Rates

Eurozone inflation rose to 2.2% in September 2025, surpassing the European Central Bank's (ECB) 2% target for the first time in months, mainly due to slower declines in energy prices and increases in services and food costs. Core inflation, excluding volatile food and energy prices, remained steady around 2.3%, with services inflation particularly high at approximately 3.2%, reflecting persistent wage pressures and ongoing cost pass-through to consumers. Despite this uptick in headline inflation, ECB policymakers, including President Christine Lagarde, view the rise as likely temporary and maintain a cautious stance, expecting inflation to hover near the target without significant upward risks. The ECB is expected to keep interest rates on hold for the foreseeable future, with little appetite for further cuts or hikes, as inflation dynamics show mixed signals between headline and core measures. Regional disparities exist, with some countries like Estonia experiencing higher inflation while others, such as Cyprus and France, see minimal changes. Overall, the ECB remains focused on monitoring wage-driven inflation pressures and broader economic trends, emphasizing patience before adjusting monetary policy.