(Sept 29): Spanish inflation accelerated more than anticipated and further beyond the European Central Bank’s 2% target, reinforcing the case for interest rates to be lifted further.

Consumer prices jumped 5% in September, up from 4.6% in August, data Tuesday showed. That is the highest since February 2023 and above the 4.9% median estimate in a Bloomberg survey of analysts.

Fuel and package holidays were behind the steep rise, the statistics agency said. A gauge of underlying price pressures also advanced more than expected.

Europe is grappling with a renewed upswing in energy costs stemming from the Iran war, though the region’s economy has so far held up surprisingly well. Spain’s numbers are the first for this month from a major euro-area member and are likely to be the highest. While others will also probably report faster readings, they should all come in below 4%.

Eurostat will release figures on Friday for the 21-nation euro zone. Economists estimate inflation reached a three-year high of 3.7%.

That is unlikely to be the peak, however. A monthly sentiment poll by the European Commission found firms’ selling-price expectations held above long-term averages in all sectors while consumers’ inflation expectations for the next 12 months rose "noticeably".

A national gauge of price increases in Belgium, meanwhile, neared 5% in September, separate data Tuesday showed.

Speaking on Monday, ECB President Christine Lagarde reiterated that second-round inflation effects are so far absent, meaning the ECB should adopt a “measured response as appropriate to keep inflation in check”.

While policymakers have so far raised the deposit rate twice, to 2.5%, markets are pricing almost four more quarter-point moves in this cycle. Traders trimmed bets after Lagarde said higher bond yields will weigh on inflation as well as the economy.

Spain has been the continent’s standout growth story, contributing to its speedier inflation. Gross domestic product will rise 2.3% this year and 1.7% in 2027, according to the country’s central bank, while unemployment is at the lowest since the financial crisis in 2008.

Inflation for the whole of 2026 is likely to come in at 3.6%, the Bank of Spain said in June, before the latest surge in oil and natural gas prices.

Uploaded by Arion Yeow