Home · Business · Oct 2 archive
Eurozone Inflation Surges to 3.8% in September
Confirmed
In Short: The Eurozone's annual inflation rate surged to 3.8% in September, marking its highest level since 2023 and exceeding expectations. This increase was primarily driven by energy costs, which have risen significantly due to the ongoing Middle East conflict.
The Eurozone's annual inflation rate surged to 3.8% in September, marking its highest level since 2023 and exceeding expectations. This increase was primarily driven by energy costs, which have risen significantly due to the ongoing Middle East conflict.
Energy prices were the main driver of inflation, with diesel prices hitting record highs in several Eurozone countries. The inflation rate in Spain, for instance, rose to 5% in September from 4.6% in August.
Despite the overall increase, food inflation remained relatively stable, ticking up from 1.1% to 1.4%. Core inflation, which excludes volatile food and energy costs, rose slightly from 2.4% to 2.5%, indicating a potential increase in the pass-through of higher energy costs to other sectors.
ECB President Christine Lagarde expressed surprise at the limited impact of higher energy costs on other inflation categories during the last ECB press conference. However, she noted that the current inflation surge has not yet generated dangerous second-round effects across the Eurozone.
The September survey indicated an uneven recovery in the Eurozone, with inflation expectations rising and selling-price expectations increasing sharply in industry and construction. Consumer spending fell 0.5% in France in August, and the country's public debt stood at 119% of GDP in the second quarter.
The Euro traded mixed on Monday as investors anticipated the Eurozone inflation data, with economists expecting the European Central Bank to resume raising interest rates. New York Fed President John Williams indicated openness to raising interest rates at the upcoming FOMC meeting.
Some analysts noted that core inflation in Germany remained steady at 2.4% in September, while the Eurozone business climate index fell short of expectations despite improvements in Germany.
The September inflation data has strengthened the case among ECB hawks for a more aggressive pace of tightening. However, the ECB's moderate policy response remains appropriate given the current inflation dynamics.
The next key data release will be the September inflation report, due on October 14, which will largely determine the Fed's decision on further rate hikes.
What this adds
The Eurozone services sentiment improved to 6.1 in September, up from 5.8 in the previous month, according to the latest data.
Background
Eurozone services sentiment improved to 6.1 in September, up from 5.8 in the previous month, according to the latest data.
The Eurozone economic sentiment weakened in September, falling from 98.4 to 97.9, below the expected 99.0 and its long-term average of 100.
What's confirmed
- He joined the firm in July 2015 and covers the global economy with a specific focus on the Eurozone.
What's still developing
- This is weighing significantly on the inflation basket for the moment.
- In fact, food inflation is still lower than in June, and core inflation has been moving between 2.4 and 2.6% since May.
- Crédit Agricole noted that energy was again a key factor in Eurozone inflation, describing it as 'back in the driver's seat.
- Tuesday, September 29, 2026 · 8:06 AM ET In Short: The Eurozone economic sentiment weakened in September, falling from 98.4 to 97.9, below the expected 99.0 and its long-term average of 100.
- EUR/USD edged down to 1.1578 on September 2, 2026, pressured by hawkish signals from Federal Reserve officials and accelerating Eurozone inflation.
- The EUR/USD currency pair declined modestly to 1.1578 on September 2, 2026, reflecting a complex interplay of hawkish Federal Reserve signals, rising inflation in the Eurozone, and broader dollar strength.
- This marks a notable shift from his previous more cautious stance and adds to the hawkish tone set by Fed Chair Kevin Warsh on August 28, who suggested that further rate hikes might be necessary to tackle persistent inflation.
- In the Eurozone, heightened inflation risks and robust growth in economic demand point to another ECB rate hike to 2.5% in September.
- We therefore expect the Fed to raise rates in September and anticipate another hike in the first quarter of 2027.
- But with core inflation still at the same level as it was before the Middle East war started – 2.4% in both February and August – eyes will once again be on whether signs of second-round effects are kicking in.
- There are two key reports that will largely determine what the Fed decides to do, with the first – the September jobs report – due on Friday.
- Given that the low-hire, low-fire narrative remains in place, we expect a downward revision to that August number, with September coming in at around 100k jobs added.