Surging fuel prices mean inflation keeps on rising

Surging fuel prices sustained Luxembourg's rising inflation last month as overall prices increased a further 0.1% between August and September, the country's official statistics agency Statec said on Wednesday, with the cost of fuel having jumped by more than a third in a year.

Fuel prices rose 1.2% between August and September, while heating oil also went up by 2.4% in the same period, keeping in line with global surges in the cost of fossil fuels.

Fuel has skyrocketed in the past year, jumping by more than a third - 34.6% - compared to September 2020. Statec attributed the spike to the rebound from "exceptionally low prices" last year when the global pandemic caused economic activity to slow. As of Wednesday, car owners need to pay €1.33 per litre of diesel and between €1.43 and €1.48 for petrol, according to the most recent maximum prices set by government.

Overall inflation was up 2.7% in September - when compared with prices in the same month last year -  from 2.5% the previous month, Statec said. While electronics, travel goods and cosmetics experienced the sharpest increase, some items, such as flat-rate holidays and flight tickets, were cheaper compared to August, according to Statec.

Higher prices in recent months led to the triggering of a wage and pension indexation of 2.5% last week which will be added to incomes this month. Wages in Luxembourg are required to be increased every time prices for consumer goods and services jump by more than a certain threshold, normally 2.5%. The measure last kicked in at the start of 2020.

In July, amid rising prices across the eurozone, the European Central Bank adapted its inflation target to 2%, an upward shift from its previous model of "below but close to 2%".

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