Inflation in the euro zone rises to 3.8 percent in September

Inflation in the euro zone rose significantly in September to its highest level in three years due to high energy prices. Consumer prices rose by 3.8 percent year-on-year, according to an initial estimate from the Eurostat statistics office in Luxembourg. This is the highest inflation rate since September 2023. In August it was 3.2 percent.

This means it is well above the price target of the European Central Bank (ECB), which is aiming for annual inflation of two percent in the medium term. Economists therefore expect the ECB to raise key interest rates for a third time this year. The deposit interest rate, which is important for savers and banks, would rise to 2.75 percent.

“It is primarily the massive price increases for energy that caused inflation to rise to its highest level since autumn 2023,” said Commerzbank chief economist Jörg Krämer. There were increasing signs that companies were passing on the higher energy prices to customers. “The ECB will not like this entrenching of inflation. It will have to raise its key interest rates further.”

Thomas Gitzel, chief economist at VP Bank, made similar comments. “An interest rate hike by the ECB in December is almost set in stone. Meanwhile, the monetary authorities are likely to keep their key interest rates constant at their October interest rate meeting.

Expensive oil and high fuel prices are key drivers

The rise in energy prices accelerated again in September. Here Eurostat reports an increase of 18.8 percent year-on-year - after 14.3 percent in August. With the Iran war, crude oil prices on the stock exchanges rose sharply and with them fuel prices at gas stations. In addition, price increases for services in the euro area accelerated.

Inflation has also increased in Germany. In September, rising prices for heating and fueling drove the inflation rate to 3.3 percent - the highest level since the end of 2023. The federal government is once again easing the burden on drivers with a fuel discount that will reduce taxes by around 17 cents per liter of fuel from October to the end of the year.