The eurozone’s annual inflation rate last month fell to its lowest level in three-and-a-half years, official data showed yesterday, dropping below the European Central Bank’s (ECB) 2 percent target and fueling expectations of a rate cut.
Year-on-year consumer price increases in the single-currency area slowed to 1.8 percent last month, down from 2.2 percent in August, thanks to falling fuel costs.
The rate for the eurozone was the lowest since April 2021 and beat predictions of 1.9 percent by analysts surveyed by financial data firm FactSet.
Photo: EPA-EFE
Core inflation — which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the ECB — cooled slightly to 2.7 percent last month from 2.8 percent in August, the EU’s official statistics agency said.
ECB President Christine Lagarde on Monday told a European Parliament hearing that rate-setters would take the new data on inflation “into account in our next monetary policy meeting in October.”
The Frankfurt-based body has already cut borrowing costs twice in the past few months, and Tuesday’s data will raise hopes for another reduction at the next meeting on Oct. 17.
The latest figures “should be sufficient to persuade the ECB to cut rates in October, even though services inflation remained high,” Capital Economics Ltd senior Europe economist Franziska Palmas said.
Consumer price rises have significantly slowed since the 10.6 percent peak in October 2022 after energy costs soared following Russia’s invasion of Ukraine that year.
Sky-high inflation pushed the ECB to aggressively raise rates, but with inflation now below target, the bank’s “concerns seem to be shifting towards the lackluster growth environment,” ING Groep NV senior economist Bert Colijn said.
The ECB last month said it expects expansion of just 0.8 percent this year, a figure revised down from a previous prediction of 0.9 percent published in June.
Yesterday’s data showed energy prices fell sharply by 6 percent last month, compared with a drop of 3 percent in August.
Services inflation, which had been accelerating in recent months, slowed to 4 percent last month, down from 4.1 percent in August, Eurostat data showed.
However, food and drinks prices ticked up slightly, by 2.4 percent compared with 2.3 percent in August.
Meanwhile, consumer price increases fell below 2 percent in the EU’s two biggest economies, Germany and France, reaching 1.8 and 1.5 percent respectively.
Ireland registered the lowest inflation rate across the eurozone, at 0.2 percent, the data showed.
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