Spain’s inflation hits 5%, highest since February 2023

Seven months into the conflict that began in Iran on February 28, its effects on household budgets are now showing up clearly in Europe’s autumn inflation data. Spain, France and Poland all posted faster price growth in September, driven by fuel costs, at a moment when central banks are already weighing further rate increases.

• Spain’s harmonized inflation rate hit 5% in September, its highest level since February 2023.
• Poland’s inflation rose to 4.0%, breaching the central bank’s 3.5% tolerance ceiling for the first time since mid-2025.
• The European Central Bank raised its deposit rate to 2.5% on September 10.

• 5% Spain’s harmonized inflation rate, highest since February 2023
• 3.4% France’s harmonized inflation, up from 2.6% in August
• 4.0% Poland’s inflation, above its 3.5% central bank tolerance ceiling
• 2.5% ECB deposit rate set September 10

Spain’s national statistics agency INE reported Wednesday (September 30) that the country’s harmonized consumer price index reached 5% year on year, the fastest pace since February 2023, according to INE data. France and Poland also posted faster price growth, with energy costs leading the increases across all three countries. The readings arrive seven months after fighting began in Iran on February 28 and land just weeks after the ECB’s most recent rate move, according to reporting by BeInCrypto.

Spain’s inflation hits 5%, its highest since February 2023

Spain’s national consumer price index rose 4.9% year on year, INE said, with vehicle fuel prices climbing this September after falling a year earlier. Package holiday prices also fell by less than they did in 2025, adding further upward pressure to the index.

The harmonized figure of 5% exceeded the 4.9% median forecast in a Bloomberg survey of economists. Bloomberg noted the reading pushes Spain further above the ECB’s 2% target and strengthens the case for additional rate hikes, according to Bloomberg’s reporting.

Core inflation in Spain, which strips out volatile food and energy prices, rose to 3.1%, its highest reading since March 2024. That measure suggests price pressure is broadening beyond fuel costs alone, even as energy remains the primary driver of the headline number.

France and Poland accelerate as Germany’s states signal more to come

French harmonized inflation jumped to 3.4% from 2.6% in August, its fastest pace in more than two years, and topped analyst estimates. On the national measure tracked by statistics agency Insee, prices rose 3% over the year, the highest since February 2024, according to a post on X from Infos Françaises.

Poland’s inflation climbed to 4.0% from 3.4%, pushing it above the central bank’s 1.5% to 3.5% tolerance band for the first time since mid-2025. Transport costs there had already risen 11.2% on higher fuel prices, well ahead of the headline rate. The National Bank of Poland has held its benchmark rate at 3.75% since March, Bloomberg reported.

Germany published preliminary figures from five states on Wednesday (September 30), all showing acceleration. Hesse posted the highest regional reading at 3.4%, up from 3.0%, while North Rhine-Westphalia and Lower Saxony both rose to 3.3% from 2.9%.

Bavaria climbed to 3.2% from 2.9%, and Baden-Wuerttemberg reached 2.9% from 2.6%. Destatis President Ruth Brand linked August’s energy jump directly to the war.

The rise in energy prices, caused primarily by the war in Iran, was particularly noticeable in the case of motor fuel prices.

Ruth Brand, President, Destatis

Central banks from Frankfurt to Sydney reach for the brake

The ECB lifted its deposit rate to 2.5% on September 10, and President Christine Lagarde said policymakers are not committing to a set rate path. As of September 29, ECB Watch data priced a 70% chance the central bank holds at 2.5% at its October 29 meeting, versus 30% odds of a quarter-point hike to 2.75%.

The picture shifts for the following meeting on December 17, where traders see a 2.75% deposit rate as most likely at 68.4% odds, with a move to 3% carrying 28.8% odds.

Other central banks have moved faster. The Federal Reserve raised rates on September 16, its first increase since 2023, and the Reserve Bank of Australia followed on September 29, lifting its cash rate to 4.6%, the highest since 2011. The RBA said the Middle East conflict had widened, pushing energy prices well above its August forecasts.

The BlockWest read. Central banks pausing or hiking into an energy shock leaves real yields higher for longer across the eurozone, and that tightening squeezes the same discretionary capital that has flowed into digital assets during looser policy windows. Allocators watching the ECB’s October 29 decision should treat a hold at 2.5% as only a delay, not a signal that rate risk to risk assets has passed.

Eurostat is due to release its eurozone flash inflation estimate on Friday (October 2), after August’s 3.3% reading already marked the highest since September 2024. The ECB’s next rate decision follows on October 29, when ECB Watch currently gives a 70% chance of a hold at 2.5% against 30% odds of a hike to 2.75%.

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