Euro area inflation remained concentrated in energy-related categories in September, with only 19 consumer-price components recording increases above 5%, a speech published by the Bank for International Settlements said.
The increase had yet to spread widely across other prices. The BIS published “Monetary policy in times of geopolitical tensions and technological disruption” on Oct. 27 in its central bankers’ speeches series.
The analysis compared recent euro area prices, growth and labour conditions with developments since 2024 and the energy shock following Russia’s 2022 invasion of Ukraine. It gave no separate research sample period.
The 19 categories belonged to a total of 136 components in the harmonised consumer-price index. The share recording price increases above 3% had changed little since early 2024.
September inflation reached 3.8%, while energy prices rose 18.9%. Core inflation, which excludes energy and food prices, stood at 2.5%.
Higher energy commodity prices and wider refining and distribution margins pushed up consumer energy costs. The increases were concentrated in categories including fuel, electricity and transport services.
Other prices had, on average, changed little since the Middle East conflict escalated. Inflation had not spread widely “at least for the time being”.
Weaker demand for workers and easing wage growth distinguished current conditions from the rapid post-pandemic recovery during the previous energy crisis. There was little evidence that energy costs were feeding into broader wage and price increases.
The European Central Bank’s September projections put core inflation at 2.6% next year. The central bank forecast headline inflation of 2.1% and core inflation of 2.3% in 2028.
The inflation outlook depended heavily on the Middle East conflict and how higher energy costs spread through the economy. Any broader effects would help determine the monetary policy response.
The central bank raised interest rates by 0.25 percentage point in September. The decision was linked to inflation above the 2% target and continuing price increases from the conflict.
Growth figures also required care. Revised second-quarter expansion was 0.6%, but a measure replacing Irish gross domestic product with modified domestic demand showed quarterly growth of 0.3% throughout the first half.
Multinational companies’ activities in Ireland made the headline figures volatile. Higher borrowing costs could weaken loan demand, economic growth and price increases.
The speech called for greater European investment in defence, non-fossil energy and productivity. It advocated completing the Savings and Investments Union to direct more European savings into business investment.
