Annual inflation in the euro area jumped to 3.8% in September 2026, up from 3.2% in August, beating economists’ expectations.
The surge in energy prices puts the European Central Bank (ECB) under pressure as its inflation target remains set at 2%.
The essentials
- The euro area’s annual inflation reached 3.8% in September, up from 3.2% in August and 3.6% expected by Reuters consensus.
- Energy prices rose 18.8% year over year, versus 14.3% in August.
- Core inflation, excluding energy, food, alcohol and tobacco, rose to 2.5%, from 2.4%.
- The ECB has maintained a 2.50% deposit rate since September 16, after two 25 basis-point hikes since June.
- Markets are pricing in further increases: LSEG data cited by Reuters place the probability of a 25-basis-point rise in December at around 65%.
Inflation at its highest in three years
According to Eurostat’s flash estimate published on Friday, October 2, the annual inflation in the 21 euro-area countries reached 3.8% in September 2026, up from 3.2% in August. This is the highest level in three years.
The rise also surprised economists: a Reuters poll had expected 3.6%. On a monthly basis, the Harmonised Index of Consumer Prices rose by 0.6% in September.
Eurostat notes that these are provisional data. The full September figures are due to be published on 16 October 2026.
Energy explains the bulk of the acceleration
The main driver of this renewed inflation upturn is energy. Its prices rose by 18.8% year over year in September, after already rising by 14.3% in August.
Prices for services advanced by 3.2%, compared with 3.0% a month earlier. Food, alcohol and tobacco rose by 1.4%, after 1.1% in August. In detail, non‑processed foods accelerated to 4.0%, up from 2.7%.
Industrial goods excluding energy, by contrast, slowed slightly: their inflation eased from 1.2% to 1.1%.
Core inflation, which excludes energy, food, alcohol and tobacco in order to better gauge underlying pressures, rose to 2.5%, from 2.4% in August. This relatively modest increase so far shows that the energy shock has not yet fully transmitting to other prices.
Wide divergences across euro area countries
Gaps remain large among the 21 members of the euro area. Eurostat’s estimate places Lithuania at 6.1%, Bulgaria at 5.6%, Cyprus and Luxembourg at 5.2%, Greece at 5.1% and Spain at 5.0%.
Among the main economies, inflation runs at 4.1% in Italy, 3.4% in France and 3.3% in Germany. The lowest rates are observed in Malta at 2.4% and in Finland at 2.6%.
ECB facing the risk of another rate hike
The rise in inflation comes as the ECB has already tightened monetary policy twice since June. After an initial 25 basis point hike, the deposit facility rate was raised again in September to reach 2.50% as of September 16.
The main refinancing operations rate is now set at 2.65% and the marginal lending facility rate at 2.90%. The ECB continues to affirm that its decisions will be taken on a meeting-by-meeting basis depending on economic data.
The next monetary policy meeting is scheduled for October 29. Nonetheless, several economists still expect the ECB to wait until December. Standard Chartered now anticipates a 25 basis point rise in December, which would lift the deposit rate to 2.75%. According to LSEG data cited by Reuters, markets price in about 65% probability of such a move in December.
More broadly, Reuters notes that investors are pricing in up to three additional increases in the deposit rate over the coming year, although these expectations are liable to change rapidly with energy prices and new economic data.
An energy shock already costly for European states
The rise in oil and gas prices also weighs on public finances. According to the European Commission, EU governments mobilised €17.9 billion in 2026 to mitigate the impact of higher energy prices on households and businesses, i.e., around 0.1% of GDP of the EU27.
More than two-thirds of these measures take the form of broad price-containment measures rather than targeted schemes. The Commission urges member states to prioritise temporary support focused on the most vulnerable households and businesses.
In its September projections, the ECB envisaged an average inflation of 3.0% in 2026, then 2.5% in 2027 and 2.1% in 2028. The surge observed in September therefore reinforces the uncertainty about how quickly inflation can sustainably return to the 2% objective.
