Inflation in the euro area hit a new high for the 11th consecutive month as energy prices continued to rise, bolstering calls for the European Central Bank to continue aggressive interest rate rises when it meets next month.
Consumer prices in the eurozone rose 10 per cent in the year to September, accelerating from 9.1 per cent in August, which was already the highest level in the 23-year history of the euro. This also outstripped the 9.7 per cent expected by economists polled by Reuters.
Russia’s squeezing of natural gas supplies to Europe after its invasion of Ukraine has sent wholesale gas and electricity prices surging and forced governments to intervene by spending hundreds of billions of euros to shield consumers and businesses from the economic pressures.
Eurostat, the European Commission’s statistics arm, said energy prices rose 40.8 per cent in September, up from 38.6 per cent the previous month. Prices of food, alcohol and tobacco rose 11.8 per cent, up from 10.6 per cent in August.
Core inflation, which excludes more volatile energy and food prices to give economists a clearer idea of underlying price pressures, rose 4.8 per cent, up from 4.3 per cent in August.
More than half the euro area’s 19 countries had double-digit levels of inflation and in three Baltic countries it was above 20 per cent. However, inflation slowed in France from 6.6 per cent to 6.2 per cent — the lowest in the bloc thanks to large government subsidies on energy bills.
The jump in energy and food prices is exacerbating a cost of living crisis that economists expect to drag the 19-country bloc into a recession this winter, as households reduce their spending and industrial groups cut back on production.
The overall eurozone figure was lifted by German inflation, which hit a new 71-year-high of 10.9 per cent in September after the expiry of government measures to cushion the impact of the energy crisis, including a fuel duty rebate and a subsidised €9 monthly train ticket.
The ECB, which targets inflation of 2 per cent, has said inflation is “far too high” and indicated it intends to keep raising rates until price growth slows down appreciably. The central bank has raised its deposit rate by 1.25 percentage points at its last two policy meetings and markets are pricing in a further 0.75 percentage point rise on October 27.