Inflation in the euro zone accelerated to 3.8 per cent in September, exceeding economists’ expectations and increasing pressure on the European Central Bank (ECB) over its interest-rate policy.

The latest figure, released by Eurostat, the European Union’s statistics agency, rose from 3.2 per cent in August and surpassed the 3.6 per cent forecast in a Reuters poll of economists.

The increase was largely driven by higher fuel and natural gas prices, while rising food costs also contributed to the overall increase.

The latest rise is expected to keep inflation elevated in the coming months, increasing pressure on governments to provide relief for households and businesses facing higher energy and other operating costs.

Core inflation, which excludes volatile food and energy prices and is closely monitored by the ECB, also increased, though more moderately, rising to 2.5 per cent from 2.4 per cent. The increase reflected higher prices for services.

The surge in energy costs has already prompted some European governments to consider measures aimed at shielding consumers and businesses from the impact of higher prices.

In France, for instance, rising costs have contributed to protests, while government support measures have added to pressure on already strained public finances.

The latest inflation figures present the ECB with competing considerations as it determines its next interest-rate decision. Headline inflation is now significantly above the bank’s 2 per cent target, potentially strengthening the case for further rate increases following two hikes during the summer.

However, the relatively limited increase in core inflation indicates that higher energy prices have not yet produced substantial secondary effects, such as sustained wage growth or broader price increases.

Jack Allen-Reynolds of Capital Economics said the latest figures had not altered his expectation that the ECB would likely wait until December before increasing interest rates again.

He added that an October rate increase could not be ruled out if energy prices continued to climb.

Financial markets are currently pricing in as many as three additional increases to the ECB’s 2.5 per cent deposit rate over the next year, although an October hike is viewed as unlikely, with the next increase not fully priced in until January.

The ECB is also monitoring the impact of higher borrowing costs on financial stability. Longer-term bond yields have risen sharply, while the gap between French and German government bond yields has widened to multi-decade highs, raising concerns about debt sustainability.

Economists expect these financial risks to feature prominently in the ECB’s deliberations, particularly as underlying inflation has not yet indicated an immediate need for aggressive monetary tightening.