Brussels: Eurozone inflation accelerated to 3.4 per cent year-on-year (y-o-y) in September, reaching a 13-year high, according to a flash estimate published on Friday by Eurostat, the statistical office of the European Union (EU).
Energy prices were still the main driver of inflation in the 19-member eurozone. They increased
17.4 per cent y-o-y, Xinhua news agency reported.
Food, alcohol and tobacco, and non-energy industrial goods prices all recorded a 2.1 per cent yearly growth. Services price growth accelerated to 1.7 per cent in September.
In August, the yearly inflation rate had already broken a ten-year record at three per cent.
According to Carsten Brzeski, global head of macro research at ING, inflation rates in the eurozone are still mainly driven by temporary factors. There are signs that this high inflation rate could be more persistent than originally expected.
“We see two kinds of second-round effects materialising,” said Brzeski. The first is that producers will be passing on higher production costs to consumers. They will not be reducing their margins, as they previously did.
“The second pass-through channel will be wages. The mismatch in the labour market between the lack of skilled workers and still high unemployment rates as well as a re-regionalization of production as a result of supply chain frictions could give rise to higher wages,” Brzeski said.
Nonetheless, the European Central Bank (ECB), which over the past few months has described the post-lockdown inflation hikes as temporary, is now taking things more seriously. The ECB’s own inflation previsions have been consistently too low.
Brzeski is observing the action by ECB to contain the inflation.
The ECB’s goal is to guarantee price stability across the eurozone, aiming at a consistent two per cent inflation rate.
