Inflation is back above 3%. Who feels it?

In January, euro area inflation was 1.7%, comfortably below the European Central Bank’s 2% target. By September it had more than doubled, to 3.8%, the highest since September 2023, when it was 4.3%. In August it had been 3.2%; only March saw a bigger month-to-month jump this year.

In a longer view, 3.8% is high but not extreme. Between 1999 and 2020, euro area inflation averaged 1.6% a year. It peaked at 10.6% in October 2022, when energy prices were rising by more than 40% a year; in September 2026 they rose 18.9%.

Energy did most of the work

Break the 3.8% into its parts and one stands out. Energy prices were 18.9% higher than a year earlier, and on their own they added 1.71 percentage points to the headline rate: almost half of it. Services, which include rents, holidays, insurance and haircuts, rose 3.2% and added another 1.52 points.

Everything else was calm. Food, alcohol and tobacco rose only 1.3%. Other goods, from clothes to cars, rose 1.1%. Strip out energy and the picture looks much closer to the target. Core inflation, which excludes energy, food, alcohol and tobacco, has stayed between 2.2% and 2.6% all year and was about 2.5% in September.

That matters for who feels it. Energy is a bill nobody can skip, and it takes a bigger slice of the budget for households on lower incomes than for richer ones. A rise driven by energy lands hardest on the people with the least room to absorb it.

In euros, the arithmetic is simple. A shopping basket that cost €100 in September 2025 cost €103.80 a year later. An energy bill of €100 became €118.90. For a household spending €150 a month on electricity, heating and fuel, that is about €28 more every month, or roughly €340 over a year, before anything else on the receipt has changed. For a household spending twice that, the extra cost doubles too, but it is usually a smaller share of what comes in.

Six and a half times apart

The euro area average also hides a wide spread. Across the EU in September, annual inflation ran from 6.5% in Romania to 1.0% in Sweden. Seven countries were at 5% or above: Romania, Lithuania, Bulgaria, Cyprus, Luxembourg, Greece and Spain. Five were below 2.5%.

6.5

RO

6.1

LT

5.6

BG

5.2

CY

5.2

LU

5.1

EL

5

ES

4.5

BE

4.3

HR

4.2

IT

4

PL

3.8

EU

3.8

IE

3.7

SI

3.6

AT

3.6

PT

3.4

FR

3.3

DE

3.1

EE

3

LV

3

NL

3

SK

2.7

FI

2.4

MT

2.2

CZ

2.1

DK

2.1

HU

1

SE

Source: Eurostat, euro indicators, 16 October 2026.

Malta sits near the bottom, at 2.4%, the fifth-lowest rate in the EU. The reason is visible in the data: Malta’s energy prices did not move. Its HICP energy component was 0.0% higher than a year earlier in every month from January to September 2026. The government holds household electricity and fuel prices fixed and pays the difference through the state energy companies, so a rise in world energy prices lands on the public accounts rather than on household bills.

What happens next

The ECB has already responded. It raised its deposit facility rate to 2.25% in June and to 2.50% in September, pointing to energy prices pushed up by the conflict in the Middle East, then held it on 29 October, noting that energy prices had continued to rise. Its September staff projections put headline inflation at 3.0% for 2026, 2.5% in 2027 and 2.1% in 2028.

September’s services figure, at 3.2%, is the one to watch. If it keeps climbing, higher prices are spreading from energy into wages and services, and the case for another rate rise gets stronger.

Eurostat’s flash estimate for October is due on 4 November. We will update the charts when it lands.