EL7.AI
Macro EconomyMedium•4 November 2026•
3 min read

Euro Zone Inflation Forecast at 4.0% Coincides With Democratic Majority in Congress

Key Facts

1MUFG forecast euro zone headline inflation would rise to 4.0% in October from 3.8% in September, with core inflation remaining at 2.5%.
2Democrats flipped six Republican Senate seats, securing a majority, according to Reuters.
3The euro rose 0.6% to $1.1258, while the dollar index fell 0.6% to 101.27 points.
4The Nikkei fell 1.4% to 62,188.63 points on November 4, 2026.

Markets are awaiting the euro zone’s October inflation flash estimate after MUFG Research forecast the headline rate would rise to 4.0% year on year from 3.8% in September, with core inflation steady at 2.5%. The estimate comes before the official reading, making it an indicator of the likely price path rather than a final result. In the United States, the midterm elections resulted in Democrats winning majorities in both chambers of Congress, according to the Associated Press. Reuters said Democrats flipped six Republican Senate seats, securing a majority, according to its report. The result puts the balance of power in Congress at the center of market attention over the prospects for fiscal expansion to be constrained, as investors await European price data.

MUFG attributed the expected rise in headline inflation mainly to energy, describing it as "primarily an energy story." According to the institution’s estimate, available national data covered about 80% of the euro zone inflation basket when the forecast was prepared. It used that coverage to estimate that the headline rate would reach 4.0%, while forecasting the core measure would remain at 2.5%. The divergence between the two measures points to energy components as the source of the expected increase, while the institution expects no change in core inflation during October. These figures remain MUFG estimates until the official flash estimate is released.

Markets’ reaction to the election results extended into the Wednesday, November 4 session, with asset performance mixed across Asia, Europe and currencies. Japan’s Nikkei fell 1.4% to 62,188.63 points, according to the Associated Press. In Europe, Stoxx 600 futures were down about 0.2% at 0639 GMT, after recouping some of their losses of 1.4% during Asian trading, Reuters reported. In foreign exchange, the euro rose 0.6% to $1.1258, while the dollar index fell 0.6% to 101.27 points, its lowest level in a month. The moves show a mixed response across regional markets, with the euro rising and the dollar falling alongside losses in Asian stocks and European futures.

Attention now turns to the U.S. employment situation report for October, scheduled for release on Friday, November 6 at 8:30 a.m. Eastern Time, according to the U.S. Department of Labor and the Bureau of Labor Statistics. The report is among the upcoming U.S. milestones after the midterm elections; the available information contains no documented forecast for the number of jobs added. The Bureau of Labor Statistics also scheduled the release of the U.S. Consumer Price Index for October for November 10 at 08:30 a.m. Eastern Time. The sequence gives investors two consecutive U.S. readings on the labor market and prices during the following week. MUFG’s euro zone inflation forecasts remain subject to the release of the official October flash estimate.