Fuel Costs Push European Inflation Higher in September

Spain’s harmonized inflation rate rose to 5% in September, up from 4.9% in August, according to the National Statistics Institute. The reading was the country’s highest since February 2023 and exceeded the 4.9% median forecast in a survey of analysts.

Spain’s national consumer price index increased 4.9% from a year earlier. Vehicle fuel prices rose after falling in September 2025, while package holiday prices declined less than they had a year earlier. Core inflation, which excludes volatile items such as energy and food, climbed to 3.1%, its highest level since March 2024.

France’s harmonized inflation rate rose to 3.4% from 2.6% in August. It was the fastest increase in more than two years and exceeded analyst expectations.

Poland’s inflation increased to 4% from 3.4%, moving above the National Bank of Poland’s 1.5% to 3.5% tolerance range for the first time since mid-2025. Higher fuel prices lifted transport costs by 11.2%. The central bank has held its benchmark interest rate at 3.75% since March.

Germany is due to publish its national inflation figure on Wednesday. Preliminary data from five states showed annual inflation rising in each of them. Hesse recorded the highest rate at 3.4%, up from 3%. North Rhine-Westphalia and Lower Saxony each reached 3.3%, compared with 2.9% in August. Bavaria rose to 3.2% from 2.9%, while Baden-Wuerttemberg increased to 2.9% from 2.6%.

Ruth Brand, president of Germany’s Federal Statistical Office, linked the previous month’s energy-price increase to the conflict in Iran. “The rise in energy prices, caused primarily by the war in Iran, was particularly noticeable in the case of motor fuel prices,” Brand said.

The inflation data follow the European Central Bank’s decision to raise its deposit rate to 2.5% on Sept. 10, its second increase of the year. ECB President Christine Lagarde has said policymakers are not committing to a fixed path for future rates.

Market pricing on Sept. 29 indicated a 70% probability that the ECB would leave rates unchanged at its Oct. 29 meeting. A quarter-point increase to 2.75% had a 30% probability. For the Dec. 17 meeting, market pricing indicated a 68.4% probability of a 2.75% deposit rate and a 28.8% probability of an increase to 3%.

Eurostat is due to release the eurozone’s preliminary inflation estimate on Friday. Inflation reached 3.3% in August, the highest level since September 2024. The ECB is scheduled to announce its next rate decision on Oct. 29.

The U.S. Federal Reserve raised interest rates on Sept. 16 for the first time since 2023. The Reserve Bank of Australia increased its cash rate to 4.6% on Sept. 29, the highest level since 2011. The bank cited the widening conflict in the Middle East and energy prices that remained above its August forecasts.