Eurozone Inflation Slows Down, Falling Below Central Bank’s Target
In a recent flash report, Eurostat revealed that eurozone inflation has dropped to 1.8% in September, falling short of the European Central Bank’s 2% target. This reading aligns with economists’ expectations, following a three-year low of 2.2% in August. The core inflation rate, excluding energy, food, alcohol, and tobacco prices, stands at 2.7%.
Services inflation in the eurozone has eased to 4% in September, down from 4.1% in August. This decline is seen in several key eurozone economies, including France and Germany, where inflation rates have also fallen below the 2% target.
While some experts predict a temporary rebound in inflation in the coming months, others are uncertain about the sustainability of this trend. Franziska Palmas, senior Europe economist at Capital Economics, notes that the headline reading is likely to remain below 2% in the coming year. Bert Colijn, chief economist for the Netherlands at ING, suggests that a renewed pickup of inflation is not entirely certain, citing the impact of falling oil prices on petrol prices.
European Central Bank President Christine Lagarde expressed confidence that inflation will return to the 2% target, citing the expected temporary increase in the fourth quarter. However, some economists believe that the current inflation rate, coupled with slowing economic growth, may prompt the ECB to cut interest rates in October. Markets are already pricing in a 25-basis-point cut, following the release of the latest eurozone inflation data.
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