Euro zone inflation zoomed past forecasts to hit a fresh record high this month, reinforcing expectations for another jumbo interest rate hike from the European Central Bank in October.
Price growth in the 19 countries sharing the euro accelerated to 10.0% in September from 9.1% a month earlier, data from Eurostat showed on Friday, beating expectations for a reading of 9.7%.
Figures a day earlier had shown inflation in Germany, the bloc's biggest economy, jumping to its highest rate since the time of the Korean War 70 years ago.
Inflation was still driven mainly by volatile energy and food prices but continued to broaden out, with virtually all categories, from services to industrial goods, now showing painfully high readings.
That is likely to make uncomfortable reading for the ECB, which targets price growth at 2%, as it suggests that inflation is increasingly being fuelled by excess demand and is at risk of getting entrenched.
Indeed, underlying inflation, which filters out volatile food and fuel prices and is closely watched by the ECB, also jumped to a fresh high, adding to the urgency for more rate hikes after oversized moves in July and September.
Excluding food and fuel prices, inflation jumped to 6.1% from 5.5% while an even narrower measure, which also excludes alcohol and tobacco, rose to 4.8% from 4.3%.
Energy prices were meanwhile up 41% compared to a year ago while unprocessed food was up 13%.
While the ECB's next rate meeting is still almost a month away, a host of policymakers have already made the case for another 75 basis point rate hike after a combined 125 basis points of moves in two meetings, the ECB's fastest pace of policy tightening on record.
Markets now see the 0.75% deposit rate rising to around 2% by the end of the year, then to around 3% next spring before levelling off.
A key problem is that an inflation peak, predicted many times by the ECB, could still be months away as household energy contracts are repriced and sky-high gas prices filter through.
A devastating drought over the summer will keep food prices under pressure while the fall of the euro to a two-decade low against the dollar will raise imported inflation, particularly since the bloc's energy bill is mostly denominated in dollars.
But price pressures may be tamed by a looming recession. Expensive energy and projected gas shortages are draining savings and are likely to eat deep into growth as consumers will have little spare cash left.
The European Systemic Risk Board, the EU's financial risk watchdog, warned on Thursday that a perfect storm may be brewing that could challenge financial stability, as businesses and households yet to recover from the pandemic now face a fresh hit.
Confidence indicators across the bloc have also been plummeting in recent weeks, suggesting that the euro zone may already be in recession with little respite likely until the spring.
This could also provide desperately needed help for the ECB.
Workers would normally demand big pay increases during bouts of high inflation but firms are also facing soaring costs, leaving them little cash to increase wages. This is keeping wage growth muted and offering hope that price growth will eventually stabilize and start retreating next year. (Reporting by Balazs Koranyi; Editing by Catherine Evans)