Eurozone Inflation At 13-Year High

Eurozone inflation accelerated to the highest level in 13 years on surging energy prices in September, flash data from Eurostat showed on Friday.

Inflation advanced to 3.4 percent in September from 3.0 percent in August. The rate was also above economists’ forecast of 3.3 percent. This was the highest rate since September 2008.

Core inflation that excludes energy, food, alcohol and tobacco, increased to 1.9 percent, as expected, from 1.6 percent in the previous month.

Overall consumer price growth was driven by the 17.4 percent increase in energy prices.

Among other components, food, alcohol and tobacco prices were up 2.1 percent and non-energy industrial goods prices grew 2.1 percent. Prices of services rose 1.7 percent.

Inflation is set to continue its upward trend and it will reach 4 percent by November, Jack Allen-Reynolds, an economist at Capital Economics, said.

Even though inflation is likely to fall sharply next year, recent strong outturns raise the chance that at the European Central Bank’s December meeting, it will announce an end to the PEPP in March, the economist added.

With yet another surge in headline inflation, the heat is on for the ECB’s December discussion on whether a pure recalibration of asset purchases is enough or whether a more significant rewinding would be better, Carsten Brzeski, an ING economist, said.

The economist said inflation prospects are gradually moving from ‘transitory’ to ‘more persistent’. Some one-off factors should indeed fade away next year but inflation could turn out to be stickier than the ‘transitory’ camp currently assumes, Brzeski added.

On a monthly basis, overall consumer prices gained 0.5 percent in September. Final data is due on October 20.

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