Eurozone inflation climbed to 3.8% in September as energy costs surged while the ECB prepares for its October policy meeting and governments respond to tight global diesel supplies.
Inflation in the eurozone surged to 3.8% in September according to a flash estimate from Eurostat. This marked a sharp increase from August’s 3.2%. The data also showed that core inflation stood at 2.5%.
Within the eurozone’s four largest economies Italy and France experienced the most significant shifts in price levels according to qz.com. Eurozone prices rose 0.6% from August to September.
Energy was the biggest contributor to the increase. Eurostat estimated that energy prices were 18.8% higher than a year earlier. Services inflation also increased to 3.2%.
This inflation data arrives ahead of the ECB’s policy meeting scheduled for October 28-29 in Frankfurt.
Analysts are watching closely as the central bank prepares to make decisions that may affect interest rates. Harry Woolman of Validus Risk Management said the rise suggests that inflation is becoming more than an energy story. He noted that central banks are likely to be cautious about allowing broader inflation pressures to become established.
Prediction markets do not currently show a 91% chance of another ECB rate increase. Polymarket instead showed roughly a 91% probability of no change while a 25-basis-point increase was priced near 11%. The ECB raised its three key rates by 25 basis points at its September meeting.
Meanwhile concerns about diesel supplies have also grown across Europe and the United States. President Donald Trump announced on October 2 that the U.S. would not impose a diesel export ban. His announcement followed an agreement by G7 countries to release up to 100 million barrels of fuel and crude oil from emergency reserves over four months.
The agreement calls for diesel to receive priority during the first part of the release. European countries had faced pressure from the Trump administration to make more emergency diesel supplies available. Treasury Secretary Scott Bessent urged European allies to accelerate their existing commitments and release additional supplies.
The diesel export ban had been considered as U.S. fuel prices climbed sharply.
The issue was also raised by U.S. Trade Representative Jamieson Greer during meetings with European officials at the G20 gathering in Milwaukee. The U.S. has been dealing with tight diesel supplies due to disruptions involving Russia and the Middle East. Russia imposed restrictions on diesel exports during the summer and has extended its ban through the end of October.
U.S. gasoline prices are about 50% higher than they were around the start of the Iran conflict in February. Global diesel markets also remain tight despite some recovery in Middle Eastern shipments. The G7 reserve release is intended to provide short-term relief while governments continue trying to stabilize supplies and prices.
IMAGE: Senator Tim Scott meeting with Scott Bessent, President-elect Donald Trump’s choice for Treasury Secretary.. Photo: Senator Tim Scott / Wikimedia, taken 2024-11-24, Public domain