Eurozone Inflation Rate Drops to 4.3 Percent

Country by Country: A big drop in Germany but rises in Italy and Spain.

Inflation in the eurozone, after peaking at an annual rate of 10.6 percent last year, has been on the decline over the past year.

Core inflation, which strips out the volatile categories of food and energy and is considered a more reliable measure of underlying price pressures, has also been easing lately. It was 4.5 percent in September, down from 5.3 percent in August.

In Germany, Europe’s largest economy, the annual inflation rate plunged to 4.3 percent in September, from 6.4 percent in August. One reason for the sharp decline was because the figures are calculated on an annual basis. A yearlong program of subsidized rail fares that ended in June had pushed inflation rates higher during the past summer. That effect dropped out of the annual comparison this month.

France’s inflation rate fell to 5.6, from 5.7 percent the previous month. Italy’s rate rose to 5.7 percent, from 5.5 percent in August.

In Spain, which has had some of the lowest inflation rates in the eurozone this year, inflation increased for the third month in a row, to 3.2 percent in September. Rising electricity and fuel costs were the reason, according to the country’s National Statistics Institute.

Croatia’s inflation rate of 7.3 percent was the highest in the eurozone. The Netherlands, which fell into the negative zone at -0.3 percent, was the only country where prices were lower than they were a year ago.

What’s Next: Interest rates will stay high for a while.

Slowing inflation will bolster expectations that the European Central Bank may pause its campaign of further raising interest rates at its meeting in October. But the elevated interest rates, which have been weighing down businesses and consumers, are unlikely to begin coming down soon. Christine Lagarde, the central bank’s president, suggested this week that rates would not be reduced until inflation dropped closer to the bank’s 2 percent target.

“This is something that is not measured in short distances,” Ms. Lagarde said of efforts to keep inflation down. “It’s a long race that we are in.”

The bank raised its deposit rate for the tenth time in a row to a record high of 4 percent this month in its continued battle to lasso inflation. High rates make it more expensive to borrow money to expand a business or to buy a new house, car or refrigerator with credit. The added cost dampens demand but risks raising unemployment.

High rates are particularly punishing for households with variable mortgage rates — a group that comprises roughly a third of mortgage holders in the European Union.

Consumer confidence dropped in September for the second consecutive month, the European Commission reported Thursday.

Some economists have questioned what the right response is at this point to persistent price increases. Europe’s inflation is rooted in a series of unusual shocks, including pandemic-related disruptions in supply chains and skyrocketing energy prices in the wake of Russia’s invasion of Ukraine. It takes time for prices to drop again.

The latest Geneva Report on the World Economy from a nonpartisan network of economic researchers, released Thursday, argues that central banks, especially in the euro area, need to be more patient and give prices time to adjust.