Bank of Finland Board Member Tuomas Välimäki said an energy shock has raised euro-area inflation risks, while limited evidence of spillover into wages and underlying inflation leaves the European Central Bank’s return to 2% less certain. Euro-area HICP inflation rose to 3.8% year over year in September from 3.2% in August. Energy inflation reached 18.9% year over year that month, adding to the challenge of bringing inflation back to the ECB’s 2% medium-term objective. Välimäki described underlying inflation as broadly stable. He said wages had not materially responded to the energy shock and medium- and longer-term inflation expectations remained anchored. Those assessments indicate limited evidence so far of the shock spreading beyond energy prices.
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