The euro area experienced a modest rise in inflation to 2.2 percent in September 2025, compared with 2.0 percent in August and 1.7 percent in the same month of the previous year, signalling a gradual strengthening of price pressures. The increase was driven by services, which contributed the most at 1.49 percentage points (pp), reflecting higher costs in sectors such as transport, hospitality, and healthcare.

Food, alcohol, and tobacco followed with a 0.58 pp contribution, indicating sustained consumer demand amid ongoing supply chain adjustments. Non-energy industrial goods added 0.20 pp, suggesting steady price growth in manufactured products. Interestingly, energy made a negative contribution (minus 0.03 pp), offsetting broader inflationary pressures.

Regionally, headline inflation rose in Germany (2.4 percent after 2.1 percent), France (1.1 percent after 0.8 percent), Italy (1.8 after 1.6 percent), and Spain (3.0 percent after 2.7 percent). Inflation rates in France and Italy remain below the European Central Bank's target, while Germany and Spain exceed it.

The latest data suggest that while inflation remains slightly above the euro area's medium-term target, underlying service-sector dynamics and consumer spending continue to shape the region's price stability outlook. These updates take the RPI to 4 and the RPI-P to 15, indicating that economic activities, adjusted for prices, exceed the bloc's expectations.

No revision expected from the flash at 0.1 percent and 2.2 percent.

The harmonised index of consumer prices (HICP) is a measure of consumer prices used to calculate inflation on a consistent basis across the European Union. Changes in the index provide an estimate of inflation, as targeted by the European Central Bank (ECB). Eurostat provides statistics for the EU and Eurozone aggregates, individual member states and for the major subsectors. Over the short-term, the central bank focusses on a number of core measures which seek to strip out the most volatile components and so give a much better guide to underlying developments. Amongst these, financial markets normally concentrate upon the narrowest gauge which excludes energy, food, alcohol and tobacco.

The measure of choice in the European Monetary Union (EMU) is the harmonized index of consumer prices which has been constructed to allow cross member state comparisons. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In the European Monetary Union, where monetary policy decisions rest on the ECB's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the HICP are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.