Jumps in energy and food prices again pushed inflation in the 19 countries that use the euro to the highest annual rate recorded since the currency was created.
Year-over-year change in eurozone harmonized index of consumer prices
Consumer prices in the 19 countries that use the euro as their currency reached an annual rate of 10 percent in September, the highest level since the creation of the euro more than two decades ago, the European Commission reported on Friday. The double-digit pace was higher than economists predicted, and a big jump from 9.1 percent in August, the previous record.
Energy prices, which rose at an annual rate of 40.8 percent in September, were again the main contributor to accelerating inflation in the eurozone, driven higher by the invasion of Ukraine by Russia, which previously supplied most of Europe’s natural gas. Food prices rose 11.8 percent in September, from 10.6 percent in August.
Ten countries recorded double-digit inflation, including the eurozone’s largest economy, Germany. The release of Germany’s higher-than-expected inflation result the day before, which at 10.9 percent hit a 70-year high, put economists on notice that Friday’s eurozone-wide data could come in hotter than predicted.
Estonia, Lithuania and Latvia all registered inflation rates above 22 percent, while inflation in the Netherlands was 17.1 percent, up from below 14 percent the previous month. Slovakia, at 13.6 percent in September, was also among the unfortunate group of nations with higher-than-average rates.
In France, inflation eased a bit, dropping to 6.2 percent in September, from 6.6 percent the previous month. Energy inflation eased there, but food inflation increased. Still, thousands took to the streets across France on Thursday to demand higher wages to cope with inflation. The Czech Republic has also seen mass protests over the high cost of energy.
Inflation has been gnawing at living standards and savings not only in Europe but all over the world. Supply chain backlogs and disruptions stemming from the coronavirus pandemic, and the surge of activity that accompanied the reopening of economies, have pushed up prices. Soaring energy and food prices that followed Russia’s invasion of Ukraine also stoked inflation, with sanctions imposed by Europe, the United States and their allies turbocharging it.
The European Central Bank has been aggressively raising rates in hopes of halting inflation’s march across the eurozone. On Thursday, E.C.B. policymakers indicated that they are likely to approve another three-quarter-point interest rate increase at their next meeting, in late October.
The Federal Reserve’s determination to beat back inflation with higher interest rates has been nudging prices down in the United States, but pumping them up elsewhere. Anxiety about global political and economic has turmoil encouraged investors to put their money into American securities and assets because they are considered havens during times of upheaval. Elevated interest rates makes those investments even more attractive by offering bigger returns.
The result is that the United States is exporting some of its inflation to other countries. As the dollar strengthens, imports from around the world become cheaper in the United States, which helps to check inflation there. The flip side is that a strong dollar makes imports in other countries, particularly essential ones like energy and food, more expensive to buy with weaker currencies. The dollar is the world’s reserve currency and many key commodities, like oil, are priced in dollars.
Several experts say that Europe’s transition away from Russian energy is a slow process and is likely to keep oil, gas and electricity prices at painful levels for years. Sven Smit, a senior partner at the consulting firm McKinsey, said that when there is significant energy shortage that pushes up prices, there is only so much that central bankers can do about it. Higher interest rates cannot suddenly manufacture more supply, he said, so prices will remain high.
The flash estimates reported on Friday will be updated next month, when more data comes in.
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