Euro zone inflation hits highest level in 13 years as energy prices soar

Steam rises from the cooling towers at the Lippendorf power station south of Leipzig, Germany. picture alliance
LONDON, September saw the Euro zone's inflation reach its highest point in 13 years as it battles rising energy costs. According to preliminary Eurostat data, headline inflation was 3.4% in September. This is the highest inflation rate since September 2008, when it was 3.6%. This is after German consumer prices rose 4.1% in September, the highest level in nearly 30 years. The surging energy prices have fueled the rise, causing concern among policymakers. Since the beginning of the year, the front-month gasoline price at the Dutch TTF hub has increased almost 400%. This record-breaking run in energy prices will not end soon. Energy analysts warn that market nervousness will continue throughout winter.

France is the latest country to take measures to reduce costs to consumers. Jean Castex, the Prime Minister of France, stated Thursday that the government will block further increases in natural gas prices and rises in electricity tariffs. Gas prices for French consumers will increase by 12.6% starting Friday, but before these measures take effect, Spain, Greece, and Italy have taken similar steps to reduce the price rises.

The central bankers believe recent inflation spikes are temporary and that prices will fall in 2022. "We have been revising upward many projections over the past three quarters. Things are moving faster, that's true for growth, inflation, and employment," Christine Lagarde, President of European Central Bank, told CNBC in September. It is good news in that it shows that our economies are responding.