Brussels (Belgium) (AFP) – Eurozone inflation jumped to 3.8 percent in September, the highest level in three years, as the war in the Middle East fuelled a surge in energy costs, official data showed Friday.
The figure for the 21-country euro area was up sharply from 3.2 percent in August and remains well above the European Central Bank’s two-percent target, raising the likelihood of another interest rate increase. The September reading published by the statistical office of the European Union was slightly higher than the 3.7 percent forecast by economists for Bloomberg.
“Ouch,” wrote ING chief economist Bert Colijn in a note. “While it’s still mainly driven by energy prices, broader inflationary pressures are mounting as energy prices are expected to stay elevated.” As the US war against Iran drags on, the conflict has caused major disruptions to fuel supplies from the Middle East, including from the Strait of Hormuz, a key energy trade route.
Energy price increases surged to 18.8 percent in September, up from 14.3 percent a month earlier, Eurostat said. Core inflation, which strips out volatile energy and food prices, rose to 2.5 percent last month from 2.4 percent in August.
– Rate rise in October? –
“Although the rise in underlying inflation remains relatively modest, the direction of travel will be important for the (ECB) as it assesses the risk that higher energy costs begin to feed more broadly into prices,” Alex Nairn, economist at Centre for Economics and Business Research, said in a note. The analyst said he expected one further rate hike before the end of the year, “although the latest inflation data raise the possibility that this could come as early as October.”
The ECB hiked rates for a second time this year last month after policymakers lifted borrowing costs in June for the first time since 2023 in response to the energy shock triggered by the US war on Iran. Food and drinks inflation increased to 1.4 percent from 1.1 percent in August. Eurozone inflation was last above 3.8 percent in September 2023, when it stood at 4.3 percent.
The news of the latest surge in inflation came as the French leader urged G7 nations to work together to bring down fuel prices, as Washington pressures Europe to tap its strategic diesel reserves and threatens curbs on US exports. The appeal came as the European Union’s 27 countries were holding crisis talks in Brussels with the European Commission to develop a unified response to US pressure.
© 2024 AFP
