Frankfurt The inflation rate in the euro area continued to rise in September. Consumer prices increased by 10.0 percent compared to the same month last year. This was announced by the European statistical office Eurostat on Friday.
This is the highest level since the introduction of the euro. Experts interviewed by Reuters had only expected inflation to rise to 9.7 percent, after an inflation rate of 9.1 percent in August.
The European Central Bank (ECB) is actually aiming for a value of two percent for the currency area. Inflation has continued to move away from this mark since mid-2021. This increases the pressure on the central bank to move on to further interest rate hikes.
“The increase in inflation was once again much stronger than expected,” says Commerzbank economist Christoph Weil. For a long time now, he has no longer limited himself to just energy. “In order to break inflation, the ECB must continue to raise interest rates sharply,” he demands.
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The chief economist at KfW, Fritzi Köhler-Geib, also sees the ECB’s turn to “energetically continue the tightening of monetary policy”. In their view, the consequences of high inflationary pressure are becoming increasingly clear. “There is a high degree of certainty that the euro zone will face a recession in the winter,” she expects. Many households and companies have reached their financial pain threshold or are very vicinity.
In view of the high inflation, the ECB raised the key interest rate by 0.75 percentage points to 1.25 percent in September. This was the largest interest rate move in its history. She had already raised the rates in July. ECB President Christine Lagarde has also signaled further increases for the coming months.
Many experts have recently adjusted their forecasts. The US investment bank Goldman Sachs assumes that the ECB will also raise interest rates by 0.75 percentage points in October and December and by half a percentage point in February.
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By far the biggest price driver in September was energy, which rose by 40.8 percent. In August, the increase was still 38.6 percent.
Energy prices are likely to continue to drive up inflation in the coming months. As a rule, they only gradually affect inflation because, for example, electricity and gas prices for households are only adjusted over time.
In Europe, the countries also deal with energy prices very differently. For example, France has frozen gas prices at October 2021 levels. In Germany, the government is now also planning a gas price brake.
ECB representatives have repeatedly emphasized that they can hardly influence energy prices even with higher interest rates. From their point of view, the main thing is to keep inflation expectations stable and to prevent so-called second-round effects. This refers to price increases as a reaction to previous cost increases. According to KfW chief economist Köhler-Geib, Europe will initially continue to be dependent on very expensive energy imports. “It’s a reality we have to face.”
In addition to energy, food prices also rose sharply. They increased by 11.8 percent. Non-energy industrial goods rose by 5.6 percent and services by 4.3 percent. The core rate, from which prices for energy and food that are particularly susceptible to fluctuations are eliminated, was 4.8 percent.
Inflation in Estonia at 24.2 percent
There are big differences in price developments within the euro zone. The inflation rate was particularly high in the three Baltic states of Estonia (24.2 percent), Latvia (22.4 percent) and Lithuania (22.5 percent) and in the Netherlands (17.1 percent). On the other hand, it was lowest in France at 6.2 percent.
For Germany, the Federal Statistical Office had also reported a value of 10.0 percent. However, the calculation differs somewhat from that at European level because the basket of goods derived for this is composed differently. According to the European method of calculation, the inflation rate in Germany was even 10.9 percent in September.
An important reason for the deviations between the euro countries are the different approaches of how countries cushion the high gas prices. The fact that average incomes in the three Baltic states are relatively low also plays a role. This means that people there have to spend a larger part of their income on basic needs such as energy and food, where the price increases were particularly high.
More: Inflation in Germany rises to its highest level since 1951