Eurozone inflation ticks above ECB's 2% target in September

Irish inflation rose notably in September to 2.7%, marking one of the largest fluctuations among eurozone countries

While the uptick now exceeds the ECB's target of 2%, the rise in inflation is unlikely to concern policymakers, with broader economic trends suggesting Wednesday's figures reflect a temporary blip, with numbers likely to soon return to the bank's target rate. (Photo by DANIEL ROLAND/AFP via Getty Images)

Euro area inflation ticked up in September, underpinned by rises in services and food, with price levels across the 20-nation eurozone rising above the European Central Bank's (ECB) target of 2%.

Coming in at 2.2% in September, new figures from Eurostat suggest the ECB will keep rates on hold for some time, with some policymakers even worrying that inflation is going too low.

Service inflation across the 20-nation bloc is expected to have risen by 3.2% in the year, with unprocessed food forecasted to have surged by almost 5%. 

Meanwhile, core inflation, a more closely watched figure, which excludes volatile food and fuel prices, held steady at 2.3%, despite the pick-up in services inflation.

Annual inflation in Ireland has ticked up notably in the last month, rising to 2.7% in September, which reflected a significant rise from just 1.9% in August. It marked one of the largest fluctuations in inflation in the euro area last month. 

Figures for Ireland released by the Central Statistics Office (CSO) this week found that while food prices fell marginally on a monthly basis, they rose by 4.7% over the last 12 months.

Meanwhile, energy prices, which also fell on a monthly basis, were up by 1% compared to September 2024.

While the uptick now exceeds the ECB's target of 2%, the rise in inflation is unlikely to concern policymakers, with broader economic trends suggesting Wednesday's figures reflect a temporary blip, with numbers likely to soon return to the bank's target rate. 

"As we can model the future, the risks to inflation appear quite contained in both directions," ECB President Christine Lagarde said on Tuesday.

"With policy rates now at 2%, we are well placed to respond if the risks to inflation shift, or if new shocks emerge that threaten our target."

Still, some policymakers are likely to use the September figure as an argument against easing rates further and the bank is almost certain to keep rates on hold for the third straight meeting at the end of October.

The ECB expects inflation to fall to 1.7% next year and hold below target for six straight quarters, a period long enough for retailers and employers to change their own pricing and wage-setting behaviour.