Eurozone inflation accelerates to 3.4% yoy in September and hits highest level in 13 years
Eurozone inflation accelerated to 3.4% year-on-year in September, peaking in 13 years, according to a flash estimate released Friday by Eurostat, the statistical office of the European Union (EU) .
Energy prices were still the main driver of inflation in the 19 members of the eurozone, increasing 17.4% year-on-year, the Xinhua news agency reported.
Prices for food, alcohol and tobacco, and industrial non-energy products all grew by 2.1% annually. Growth in the price of services accelerated to 1.7% in September.
In August, the annual inflation rate had already broken a ten-year record at 3%.
According to Carsten Brzeski, global head of macro research at ING, although inflation rates in the euro area are still mainly due to temporary factors, such as high energy prices, the reversal of the German value added (VAT) and a general rise in prices following the reopening of economies, there are signs that this high inflation rate could be more persistent than initially expected.
“We are seeing two types of side effects materialize,” Brzeski said. The first is that producers will pass the higher production costs on to consumers instead of reducing their margins, as they previously did.
“The second channel of transmission will be wages. The labor market mismatch between the lack of skilled workers and still high unemployment rates as well as a re-regionalization of production due to supply chain frictions could lead to higher wages. “said Brzeski.
The European Central Bank (ECB), which in recent months has called post-containment inflation hikes temporary, is now taking matters more seriously. The ECB’s own inflation forecasts have always been too low.
Whether the ECB will take action to contain inflation remains to be seen, according to Brzeski.
The ECB’s objective is to guarantee price stability throughout the euro area, by targeting a constant inflation rate of 2%.
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