Energy prices drive Europe inflation to highest since 2008

Business

FRANKFURT, Germany (AP) — Sharply higher oil and gas prices helped push annual inflation in the 19 countries that use the euro to its highest in more than a decade, the European Union’s statistics agency said Friday.

Eurostat said inflation came in at 3.4% for September, up from 3.0% in August and more than the 3.3% expected by market analysts.

The overall inflation level, boosted by a jolting 17.4% increase in energy prices, is the euro area’s highest since 2008.

Higher prices for natural gas and electricity have spread concern among European governments, which are taking steps to limit rises in residential utility bills through subsidies and tax cuts.

Core inflation, which excludes volatile fuel and food, was more modest at 1.9%.

Despite higher recent inflation readings, the European Central Bank has indicated it has no plans to tighten monetary policy in response. The central bank sees higher inflation as the result of transient factors such as supply bottlenecks and statistical comparisons to extremely low energy prices a year earlier during the depths of the pandemic recession.

The bank predicts inflation will recede next year, and ECB President Christine Lagarde has said it will not “overreact” by scaling back its support measures for the economy in order to counter inflation that is only temporary.

Those measures include 1.85 trillion ($2.14 trillion) in bond purchases slated to run at least through March 2022, a step aimed at holding down market borrowing costs for companies.

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