Eurozone Prices Rise at Fastest Rate in 13 Years

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Consumer prices in the eurozone rose at the fastest pace in 13 years during September, increasing the risk that a period of high inflation will prove more durable than the European Central Bank had anticipated.

Inflation rates around the world have jumped over recent months, a pickup in price pressures that most central bankers argue is likely to fade next year as economies emerge from a period of sharp and unanticipated swings in the demand for and supply of certain goods and services.

But they also concede that the longer the period of high inflation lasts, the higher the risk that it will become self-reinforcing as workers demand high pay deals to preserve their spending power and businesses gain confidence in their ability to pass those higher costs on to consumers.

The jump in eurozone inflation during September adds to the challenges faced by the ECB in justifying its view that the currency area’s economy will continue to need some support through next year and possibly beyond as it prepares for a key policy meeting in December.

The ECB has said its policy makers will in December decide what to do with a 1.85 trillion euro bond-buying program, equivalent to $2.14 trillion, that was launched last year to counter the economic effects of the pandemic. Most economists expect the ECB to announce it will end the program in March, but beef up another, longer-running program that is focused on more sustainably lifting inflation.

It has also signaled that it will keep interest rates in negative territory through 2023.

“With yet another surge in headline inflation, the heat is on for the European Central Bank’s December discussion,” said

Carsten Brzeski,

an economist at ING Bank.

The European Union’s statistics agency on Friday said consumer prices were 3.4% higher in September than a year earlier, a pickup in the annual rate of inflation from the 3% recorded in August. It was the highest rate of price increases since September 2008, and well above the ECB’s 2% target. The inflation rate was also a little higher than the central bank had expected.

Energy prices again accounted for much of the pickup in inflation, and were 17.4% higher than in September 2020. But energy prices in autumn 2020 were unusually low as the eurozone and global economies struggled to emerge from lockdowns designed to contain the Covid-19 virus. Central bankers call those statistical quirks “base effects” and say they will drop out of inflation numbers over the course of 2022.

The September jump in inflation was also driven by a faster rise in the prices of services, although that left them just 1.7% higher than a year earlier. Prices of manufactured goods rose more slowly than in August, despite widespread reports from businesses that they are facing long waiting times for goods, particularly those that have been ordered from Asia.

“Supply issues continue to wreak havoc across large swathes of European manufacturing, with delays and shortages being reported at rates not witnessed in almost a quarter of a century and showing no signs of any imminent improvement,” said Chris Williamson, an economist at IHS Markit, which conducts monthly surveys of businesses around the world.

There are some signs that some eurozone workers may respond to the period of high inflation by demanding larger pay rises than have been common over recent decades. Germany’s powerful IG Metall labor union Monday warned that its members may strike later this month if wood- and plastics-processing firms don’t agree to a 4.5% wage rise.

However, that action would affect a small number of workers, and wage rises elsewhere have remained modest. In a speech Tuesday, ECB President

Christine Lagarde

repeated her view that policy makers will soon be confronting the same problem that has stumped them for a decade: keeping inflation around 2% for more than a few months at a stretch.

“What we are seeing now is mostly a phase of temporary inflation linked to reopening,” she said. “So, we still need an accommodative monetary policy stance to exit the pandemic safely and bring inflation sustainably back to 2%.”

The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ’s Jon Hilsenrath looks at what consumers can expect next.

Write to Paul Hannon at paul.hannon@wsj.com

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