Inflation in the eurozone rose to a 13-year high in September, driven by soaring energy prices and price levels.
Preliminary data from Eurostat on Friday showThe euro zone consumer price index rose 3.4% in September, exceeding market expectations by 3.3%, the highest since September 2008.
The rise in energy prices is an important driving force behind it.Energy prices in the euro zone rose 1.3% month-on-month in September, up 17.4% from a year earlier.
The general price level also continues to rise. Core inflation in the euro zone, which excludes volatile food and energy, rose 1.9 per cent in September, the highest level since 2008.
Market analysis believes that the rise in prices in the euro zone is mainly driven by epidemic-related factors and economic restart. Manufacturing supply chain bottlenecks have lasted longer than many initially expected, and surveys show that companies are increasingly trying to pass on rising costs to consumers to protect profit margins.
This will put more pressure on the ECB.
Eurozone inflation has jumped to its highest level in 13 years, driven by soaring energy inflation, but even core inflation, excluding energy prices, is now close to the ECB's 2 per cent target. This trend is likely to continue further as supply bottlenecks and capacity constraints persist, putting further pressure on the ECB's argument that inflation is temporary. This brings new challenges to the ECB's monetary policy adjustment.
ECB President Christine Lagarde said publicly that the ECB must not overreact to temporary supply shocks.
Ms Lagarde said European inflation was expected to rise further this autumn from 3 per cent in August, but the rise was only "temporary". The impact of measures such as higher oil prices and an end to the value-added tax cut in Germany "should disappear in the coming year"; shortages of raw materials may be longer than expected, and higher inflation may also lead to higher-than-expected demand for wages:
But so far, we have seen limited signs of this risk, which means that our benchmark scenario assumption continues to predict that inflation will be below target in the medium term.
Lagarde stressed that there is no sign that rising inflation is becoming widespread throughout the economy; the key challenge is to ensure that the ECB does not overreact to temporary supply shocks that have no impact in the medium term. it is also necessary to foster positive demand forces that may continue to push inflation towards the 2 per cent target.
This article is edited from Wall Street.