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Euro zone inflation at double-digit record piles pressure on ECB

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The euro zone’s economic crisis intensified with the first ever reading of double-digit inflation, piling pressure on the European Central Bank (ECB) to keep raising interest rates aggressively, according to Bloomberg.

Consumer prices surged 10% from a year ago in September, data from Eurostat showed Friday. That’s more than the median forecast of 9.7% in a Bloomberg survey of economists, and marks the fifth straight month the result has exceeded consensus.

Energy and food once again drove inflation, though an underlying measure that excludes them also topped estimates to reach an all-time high of 4.8%.

Such data have proven critical in driving momentum toward large rate hikes in previous months, and this result is likely to embolden calls for another large move at the next ECB decision on October 27. Investors this week began pricing in a second straight 75 basis-point increase.

While officials ramped up their aggression with a move of that size on September 8, they’ve also sought to differentiate the euro zone’s experience from that of the US, insisting that inflation in their own region is far more supply-driven than the demand-propelled consumer-price situation across the Atlantic.

With Russia starving Europe of gas supplies and winter approaching, policy makers are bracing for an even more difficult few months. Price increases may yet accelerate further in some countries, while recessions are becoming increasingly likely.

Officials on Monday raised their projection for euro-zone inflation next year by 1.6 percentage points to 6.2%, noticeably exceeding the ECB’s own outlook. Hours later, ECB President Christine Lagarde reiterated that her officials also see the danger of a higher outcome.

A relatively tight labor market may intensify such pressures. A separate report from Eurostat showed euro-zone unemployment held at a record-low 6.6% in August.