BRUSSELS: Euro zone inflation accelerated in September as energy costs soared but core prices rose at their slowest pace for a year, likely leaving the European Central Bank on track to cut interest rates soon.
Consumer prices in the 17 countries sharing the euro rose 2.7 percent year-on-year, the European Union's statistics office Eurostat said yesterday in a first estimate that marked a rise from 2.6 percent in August.
Markets had expected inflation to ease to 2.5 percent.
Energy prices jumped 9.2 percent after a 8.9 percent rise the previous month. But core inflation, excluding both energy and unprocessed foods, fell to 1.7 percent, its lowest level in a year.
Together with recent data indicating that the euro zone economy entered a recession in the third quarter, yesterday's inflation reading kept intact expectations that the ECB will not wait long before delivering a growth-boosting rate cut.
"It seems highly likely that the ECB will take interest rates down from 0.75 percent to 0.50 percent in the fourth quarter," said Howard Archer, economist at IHS Global Insight.
"While the ECB could act as soon as its October meeting next Thursday, we lean toward the view that they will probably hold off to November."
Just 14 of 73 economists polled by Reuters this week expect the ECB to cut rates when it meets next Thursday but a majority expect the bank to have lopped off 25 basis points by the end of the year.
The ECB kept its main interest rate unchanged at a record low of 0.75 percent at its meeting earlier this month, taking another policy-easing route by agreeing to launch a new and potentially unlimited bond-buying program.
Inflation fell steadily from 3 percent in November 2011 to stabilize at 2.4 percent in May, June and July, as the euro zone economy slowed sharply as a result of the sovereign debt crisis.
But it rose again for the first time in 11 months in August due to higher fuel and transport costs.
The ECB's target is to keep inflation below, but close to 2 percent, a rate it is not expected to drop back to for some time, though price pressures should ease further as the economy continues to struggle.
"Euro zone inflation should resume its downward trend before long as previous sharp increases in energy and food prices cease to boost the annual rate," said Martin Van Vliet, economist at ING bank.
"But with commodity prices remaining high and volatile, and further VAT hikes in the pipeline (e.g. in the Netherlands next month and in Finland in January), it is probably going to be a very gradual descent," he said.
Headline inflation might stay above 2 percent well into next year.
"The bottom line, however, is that underlying inflation pressures remain muted in most parts of the euro zone economy. This gives the ECB scope to ease monetary policy further," he said.
In September, Eurostat for the first time provided year-on-year prices changes in the index's components — food, tobacco, energy and non-energy industrial goods and services.
It publishes a more detailed breakdown for September as well as monthly inflation figures on Oct. 16.
Soaring energy costs fuel euro zone inflation
Soaring energy costs fuel euro zone inflation
‘The age of electricity’: WEF panel says geopolitics is redefining global energy security
- Surging demand, critical minerals, US-China rivalry reshaping energy security as nations compete for influence, infrastructure, control over world’s energy future
LONDON: Electricity is rapidly replacing oil as the world’s most strategic energy commodity, and nations are racing to secure reliable supply and influence in a changing energy landscape.
Global electricity demand is growing nearly three times faster than overall energy consumption, driven by artificial intelligence, electric vehicles, and rising use of air-conditioning in a warming world.
“We are entering the age of electricity,” said Fatih Birol, the executive director of the International Energy Agency, during a panel discussion titled “Who is Winning on Energy Security?” at the World Economic Forum in Davos on Tuesday.
Unlike oil, electricity cannot be stockpiled at scale, forcing governments and companies to prioritize generation, transmission, and storage, making regions with stable infrastructure increasingly important on the global stage.
US-China rivalry
Energy security is increasingly about control and influence, not just supply. The rivalry between the US and China now extends beyond oil to critical minerals, energy infrastructure, and long-term energy partnerships.
“The contrast between the US approach and China’s is stark,” said Meghan O’Sullivan, director of Harvard University’s Belfer Center. “The US, until recently, focused on access, not control. China flips that, seeking long-term influence and making producers more dependent on them.”
O’Sullivan highlighted China’s Belt and Road Initiative, which invests in energy infrastructure and critical minerals across Africa, Latin America, and Asia to secure influence over production and supply chains.
“It’s not just the desire to control oil production itself, but to control who develops resources,” she said, citing Venezuela as an example. The South American nation holds some of the world’s largest crude oil reserves, giving it outsized geopolitical importance. Recent US moves to expand influence over Venezuelan oil flows illustrate the broader trend that great powers are competing to shape who benefits from energy resources, not just the resources themselves.
“There’s no question that the intensified geopolitical competition between great powers is playing out in more competition for energy resources, particularly as the energy system becomes more complex,” O’Sullivan added.
Global drivers of the electricity era
The rise of electricity as a strategic commodity is also transforming global supply chains. Copper, lithium, and other minerals have become essential to modern energy systems.
“A new ‘energy commodity’ is copper,” said Mike Henry, CEO of BHP. “Electricity demand is growing three times faster than primary energy, and copper is essential for wires, data centers, and renewable energy. We expect a near doubling, about a 70 percent increase in copper demand over 25 years.”
Yet deposits are harder to access, refining is concentrated in a few countries, and supply chains are politically exposed.
“The world’s ability to generate electricity reliably will increasingly depend on materials and infrastructure outside traditional oil and gas markets,” Birol said.
AI and digital technologies amplify the challenge with large-scale data centers consuming enormous amounts of electricity.
The Middle East’s strategic relevance
While the global focus is on electricity demand and great-power rivalry, the Middle East illustrates how traditional energy hubs are adapting.
Majid Jafar, the CEO of Crescent Petroleum, highlighted the region’s enduring advantages: abundant reserves, low-carbon potential, and strategic geography.
“Geopolitical instability reinforces, if anything, the Middle East’s role as a supplier with scale, affordability, availability, and some of the lowest carbon reserves,” he said.
Jafar emphasized the region’s ability to navigate the growing US-China rivalry.
“Amid US-China global friction, the Middle East has managed to remain on good terms with both sides,” he said, noting that flexible policy and engagement help preserve influence while balancing competing interests.
The region is also adapting to the electricity-driven era. AI data centers and digital technologies are multiplying power needs. Jafar said: “One minute of video consumes roughly an hour’s electricity for an average Western household. Multiply that across millions of servers and billions of people and the scale is staggering.”
Infrastructure investments further strengthen the Middle East’s strategic position. In the Kurdistan Region of Iraq, the Runaki Project has expanded natural gas–fueled power plants to provide 24/7 electricity to millions of residents and businesses, reducing reliance on diesel generators and supporting economic growth.
According to Jafar, the combination of energy resources, capital, leadership, and agile policymaking gives the Middle East a competitive edge in meeting global electricity demand and navigating the complex geopolitics of energy.
While the panel highlighted the Middle East as one example, in the age of electricity, energy security is defined as much by influence and infrastructure as by barrels of oil, with the US-China rivalry determining who gains and who is left behind.
