Euro Area Inflation Hits 3.8 Percent, Its Highest Since 2023, as Energy Runs at 18.8 Percent
Euro area annual inflation rose to 3.8 percent in September from 3.2 percent in August, according to Eurostat’s flash estimate published on 2 October, and on our reading of the series it is the highest rate since September 2023, when it stood at 4.3 percent. Prices rose 0.6 percent on the month. Energy was 18.8 percent more expensive than a year earlier, up from 14.3 percent in August, while core inflation, which excludes energy, food, alcohol and tobacco, edged up to 2.5 percent from 2.4 percent.
Energy supplies nearly half the rate
Energy carries a weight of 90.3 per 1,000 in the basket. A simple approximation that multiplies each component’s annual rate by its basket weight, on our calculation, puts energy at about 1.7 percentage points of the 3.8 percent, or roughly 45 percent of the headline rate, with services at about 1.5 points and non-energy industrial goods and food, alcohol and tobacco at about 0.3 points each. This is an approximation, not Eurostat’s formal contribution measure.
The swing has been fast. Energy inflation stood at minus 4.0 percent in January, so September’s reading is 22.8 points higher eight months later and the highest energy rate since January 2023, when it was 18.9 percent, on our calculation. The gap between headline and core inflation widened to 1.3 points from 0.8 points in August, on our calculation, and energy accounts for most of that widening. Services prices fell 0.7 percent on the month, yet the annual services rate still edged up to 3.2 percent from 3.0 percent, inside the 3.0 to 3.5 percent range it has kept since January.
Euro area inflation by component, September 2026
| Component | September | August | Weight per 1,000 |
|---|---|---|---|
| All items | 3.8% | 3.2% | 1,000.0 |
| Energy | 18.8% | 14.3% | 90.3 |
| Services | 3.2% | 3.0% | 468.2 |
| Core | 2.5% | 2.4% | 720.4 |
| Food, alcohol and tobacco | 1.4% | 1.1% | 189.4 |
| Non-energy industrial goods | 1.1% | 1.2% | 252.2 |
Annual rates, flash estimate. Core excludes energy, food, alcohol and tobacco. Unprocessed food rose 4.0 percent and processed food, alcohol and tobacco 0.4 percent.
Inflation rises in 17 of 21 countries
Inflation rose in 17 of the 21 euro area countries, was unchanged in Cyprus, Portugal and Slovakia, and eased only in Latvia, to 2.9 percent from 3.0 percent. Nine countries now run above the euro area rate, led by Lithuania at 6.1 percent, Bulgaria at 5.6 percent and Cyprus and Luxembourg at 5.2 percent. The lowest rates are in Malta, 2.4 percent, and Finland, 2.6 percent, so every member is above 2 percent. The sharpest accelerations came in Estonia, up 1.7 points to 3.0 percent, Greece, up 1.4 points to 5.1 percent, and Luxembourg, up 1.2 points.
Spain, Italy, France and Germany, September 2026
| Country | September | August | Change, points |
|---|---|---|---|
| Spain | 5.0% | 4.6% | +0.4 |
| Italy | 4.1% | 3.2% | +0.9 |
| France | 3.4% | 2.6% | +0.8 |
| Germany | 3.3% | 2.9% | +0.4 |
Harmonised annual rates, flash estimates.
The real deposit rate moves further below zero
The European Central Bank has raised its deposit facility rate twice this year, to 2.25 percent in June and 2.50 percent from 16 September. Against September’s headline rate, the real deposit rate stands at minus 1.3 points, on our calculation, against about minus 1.0 point in August, when the rate was 2.25 percent and inflation 3.2 percent. Measured against core inflation, the deposit rate is level at 2.5 percent.
Why it matters: Energy now supplies close to half of the headline rate while core inflation has moved 0.1 point. With core inflation level with the deposit rate, the question for the central bank is whether the energy shock reaches services, where the annual rate has stayed between 3.0 and 3.5 percent all year.
Outlook: The full September data are due on 16 October. The next monetary policy decision is on 29 October, and the October flash estimate follows on 4 November.
Sources: Eurostat, European Central Bank, The Edge.
