In September, inflation rebounded slightly in the United States, the Eurozone and Japan, while remaining stable in the United Kingdom. In the United States, the inflationary impact of tariffs has so far been contained (see chart of the month). In the other countries, there are positive signs, as inflation expectations are stable at around 2% in the Eurozone, wage growth is moderating in the UK and producer prices are falling in Japan.
In the United States, CPI inflation rose slightly in September (from +0.1 pp to 3.0% y/y), driven by a rebound in the energy component (2.8% y/y; +2.6 pp m/m)
Core inflation, meanwhile, moderated (3.0% y/y; -0.1 pp m/m). Wages have continued to decelerate, and 1-year household inflation expectations have fallen sharply since May (from 6.6% to 4.6%), although 5-year expectations remain high on a historical basis. These developments, combined with the stabilisation of the price pressure index and the slowdown in producer prices (2.6% y/y, -0.5 pp m/m), support the scenario of continued rate cuts by the Fed.
Inflation in the Eurozone remains significantly lower than in the United States
However, it also rebounded in September, returning to its April level (2.2% y/y; +0.2 pp m/m). Core inflation followed the same trend (2.4% y/y; +0.1 pp). Cyprus stands out with zero inflation for the second month in a row. France (1.1%), Italy (1.8%), Greece (1.8%) and Portugal (1.9%) have the lowest inflation rates in the Eurozone, while Slovakia (4.6%), Croatia (4.6%) and Estonia (5.3%) continue to see the highest increases. The outlook remains favourable, as producer prices continue to fall, and are now back in negative territory (-0.6% y/y), and forecasters’ short-term (1 year) and long-term (5 years) inflation expectations remain close to 2%. However, underlying tensions persist, with the price pressure indicator and growth in negotiated wages (4.0% y/y compared with 2.5% in March) back on the rise.c
In the United Kingdom, inflation stabilised at a high level of 3.8% y/y in September
Core inflation slowed slightly for the second month in a row (3.5% y/y; -0.1 pp). Wage growth, while still very strong, has nevertheless moderated since January (4.7% y/y, compared with 5.3% in January), and the price pressure indicator continues to fall. On the other hand, household inflation expectations for the next year are rising sharply, while long-term expectations remain above the levels seen during the inflation crisis.
In Japan, inflation rose slightly (to 2.9% y/y; +0.2 pp m/m), mainly due to an increase in the contribution of the energy component
This increase can also be seen in the core component (3.0% according to the BoJ measure; +0.3 pp m/m). However, the outlook is for inflation to stabilise, with the producer price index slowing markedly since the start of the year and remained stable in September (2.7% y/y). In addition, wage growth is beginning to run out of steam after accelerating over the summer (1.9%, compared with 2% over the previous three months). Similarly, the price pressure indicator is well below the levels seen over the past twelve months. In addition, households’ 1-year inflation expectations have fallen very slightly since the start of the year, thereby moving in the opposite direction to forecasters' expectations, which are still rising. Japan also stands out from the other countries, with a stable yet historically high break-even inflation rate.
Chart of the month: United States: Another look at the impact of tariffs on inflation
