Eurozone inflation has accelerated sharply in recent months, with the September 2026 HICP rate reaching 3.8% year-over-year—its highest level since 2023—driven primarily by an 18.9% surge in energy prices amid Middle East geopolitical tensions. ECB staff projections from September place the 2026 annual average at 3.0%, though recent data releases and persistent energy pressures suggest upside risks that align with the market's strong 89.5% implied probability for outcomes above 3.1%. Core inflation remains more contained at 2.5%, with limited evidence of broad second-round effects on wages or services prices so far. The ECB has responded with two 25-basis-point rate hikes this year, lifting the deposit facility rate to 2.5%, while monitoring incoming energy and labor market data ahead of its next policy meetings.