Can inflation maintain its record-setting pace in the euro area even though the economy already seems to be contracting and economists are widely predicting a recession this winter? 

 he latest test will come on Friday, when the European Commission’s statistics arm will release eurozone inflation data for September. Economists polled by Reuters expect consumer price growth to have hit 9.6 per cent on an annual base, up from the all-time high of 9.1 per cent set only in August. 

 Prices of oil, steel, wood and many other commodities have fallen for several months. But this is being offset by persistently high energy costs, which are hitting both manufacturing and services companies and prompting them to raise prices

 Another factor likely to lift inflation is the expiry this month of Germany’s temporary measures to cushion the impact of high prices, such as a fuel duty cut and a subsidised €9 monthly train ticket.

 Deutsche Bank economists forecast last week that eurozone inflation would peak at the end of the year around 9.5 per cent. Price pressures also keep rising as European wholesale natural gas prices remain about two and a half times higher than a year ago, even after a recent dip.

 The European Central Bank, which has already raised interest rates by 1.25 percentage points over the summer, will be watching the latest data carefully as it considers how high to lift borrowing costs to bring inflation back to its 2 per cent target. 

 Isabel Schnabel, an ECB executive board member, underlined its concern last week, saying: “What we are seeing is that the inflationary pressures have become much more broad-based. They have somehow crept into all parts of the economy.” Martin Arnold