Eurozone rocked by record inflation as prices soar 10 percent

Eurozone consumer prices skyrocketed by a record 10 percent in September, according to official data released on Friday. Inflation has reached double digits on the back of soaring energy prices caused by Russia's war on Ukraine.

Stoked by a 41 percent increase in energy prices, the yearly inflation rate in the 19-country single currency area hit its highest level since records began, according to the EU's statistics agency, Eurostat.

That unprecedented level of inflation will encourage the European Central Bank to maintain its current policy of rate hikes, in an effort to force prices down, despite the risk of triggering economic recession in Europe.

The ECB is desperate to prevent inflation from taking root in the economy and is attempting to reduce demand, at the risk of slowing growth.

European Union energy ministers agreed on Friday to limit peak-hour power consumption and to impose windfall levies on energy companies.

The leap in inflation to 10 percent followed a 9.1 percent rise in August and doused hopes that inflation would begin to ease as energy markets stabilise seven months after Russia launched its invasion of Ukraine.

Making matters more complicated for policymakers, the eurozone's powerhouse economies are showing widely divergent inflation rates, with Germany seeing price hikes of 10.8 percent and France at 6.2 percent.

In the Netherlands inflation prices rose by 17.1 percent, the highest since World War II, in a major leap from an already sky-high 12 percent a month earlier.

Some eurozone countries are engaging in national spending to ease the energy price burden on local consumers, creating further fragmentation in the European economy.

Lagarde warns of further rate hike   

ECB chief Christine Lagarde indicated this week she would go ahead with another rate hike of 0.75 percentage points at the bank's next meeting on 27 October.

"We expect to raise interest rates further over the next several meetings to dampen demand and guard against the risk of a persistent upward shift in inflation expectations," she told EU lawmakers.

Energy prices in Europe remain under intense pressure with Russia starving the continent of gas supply as winter approaches.

The ECB's target for inflation is 2 percent and efforts to get closer to that level have raised fears that the central bank may lead the bloc into a recession in its effort to reduce prices.

"The jump in the eurozone's headline inflation rate in September into double digits will be of grave concern to the ECB," said Jessica Hinds of Capital Economics.

"Despite the weak economic outlook, we expect the banks to prioritise inflation and deliver another bumper rate hike next month," she added.

Eurostat data shows the eurozone unemployment rate remaining at a record low of 6.6 percent in July.

This will further encourage the ECB to continue to fight inflation, despite concerns about economic growth and its generally negative impact on employment.