Eurozone inflation falls under 2% for first time since 2021

Eurozone inflation falls under 2% for first time since 2021

The annual rate of inflation for the 20-country eurozone was the lowest since April 2021
The annual rate of inflation for the 20-country eurozone was the lowest since April 2021. Photo: Kirill KUDRYAVTSEV / AFP/File
Source: AFP

The eurozone's annual inflation rate fell to its lowest level in three-and-a-half years in September, official data showed Tuesday, dropping below the European Central Bank's two-percent target and fuelling expectations of a rate cut.

Year-on-year consumer price increases in the single currency area slowed to 1.8 percent in September, down from 2.2 percent in August, thanks to falling energy costs.

The rate for the 20-country eurozone was the lowest since April 2021 and beat predictions of 1.9 percent by analysts surveyed by financial data firm FactSet.

But 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 in September from 2.8 percent in August, the EU's official statistics agency said.

Read also

US Fed's preferred inflation measure edges down in August

The central bank's chief Christine Lagarde said on Monday 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 recent months, and Tuesday's data will raise hopes for another cut at the next meeting on October 17.

That is a marked change from economists' expectations earlier this year when many experts predicted the next cut would come in December.

The latest figures "should be sufficient to persuade the ECB to cut rates in October, even though services inflation remained high", said Franziska Palmas, senior Europe economist at Capital Economics research group.

The slowdown in inflation comes after energy prices fell sharply by 6.0 percent in September, compared with a drop of 3.0 percent in August, Eurostat data showed.

Read also

Cuts, cash, credit: China bids to jumpstart flagging economy

'Timely' return to target

Lagarde cautioned against assuming the period ahead would be smooth sailing, and said "inflation might temporarily increase in the fourth quarter of this year as previous sharp falls in energy prices drop out of the annual rates".

But she told a European Parliament hearing Monday that "the latest developments strengthen our confidence that inflation will return to target in a timely manner".

In its latest forecasts, the ECB said it expected inflation in the eurozone to return to a stable two percent by the end of 2025.

Services inflation, which had been accelerating in recent months, slowed to 4.0 percent in September, down from 4.1 percent in August.

But food and drinks prices ticked up slightly, by 2.4 percent in September compared with 2.3 percent in August.

Consumer price increases fell below two percent in the European Union's two biggest economies, Germany and France, in September, reaching 1.8 and 1.5 percent respectively.

Read also

German economy to shrink again in 2024: think tanks

Ireland registered the lowest inflation rate in September across the eurozone, at 0.2 percent, the data showed.

PAY ATTENTION: Сheck out news that is picked exactly for YOU ➡️ find the “Recommended for you” block on the home page and enjoy!

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.