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Annual inflation in the euro area rose to 2.2% in September, up from 2.0% in August and the highest level since April, new flash estimate data showed on Wednesday.

Among inflation’s key drivers, services led the pack with a 3.2% annual increase, up slightly from 3.1% in August, according to statistics body Eurostat, the statistical office of the European Union. Food, alcohol and tobacco prices rose by 3.0%.

Goods prices rose by 0.8%, while energy was 0.4% cheaper than a year ago.

The reading was in line with economist expectations. On a month-on-month basis, prices edged up 0.1%, mirroring August's figure.

Core inflation, which excludes volatile food and energy prices, held steady at 2.3% for the fifth month running, offering reassurance that underlying price pressures are not gaining momentum, even as headline figures rise.

Although Wednesday's figures means inflation now sits above the European Central Bank’s (ECB) forecast of 2%, it is still lower than in the UK where inflation was 3.8% in August.

Estonia posted the highest inflation rate at 5.2%, followed by Croatia and Slovakia at 4.6% each. At the other end of the spectrum, Cyprus recorded no annual change, and France saw a mild increase of 1.1%.

Meanwhile, Italy and Portugal led with price increases of 1.3% and 1.0% respectively, suggesting some localised acceleration.

It comes as the ECB kept interest rates unchanged at its September meeting, maintaining the deposit facility at 2%.

Its projections showed inflation is expected to average 2.1% in 2025, easing to 1.7% in 2026, before nudging back up to 1.9% in 2027. Core inflation is seen gradually declining over the same horizon.

Diego Iscaro, head of European economics at S&P Global Market Intelligence, said: “Eurozone inflation remains moderate, despite sitting above the ECB’s target for the first time in five months.

"However, stickiness in inflation, alongside moderating wage growth, is resulting in a less supportive environment for household finances. This will likely limit the upside for growth during the fourth quarter of the year.

“September’s “flash” inflation figures strengthen the case for the ECB keeping interest rates on hold for the rest of the year. The door to further cuts in the current cycle isn’t firmly closed, but price pressures will need to ease considerably for them to be solidly back on the table.”