Inflation in the Eurozone fell below the 2% target set by the European Central Bank as the reference level. The new scenario gives rise to the hope that interest rates can be reduced even further, although European Central Bank President Christine Lagarde was very cautious on this issue in the European Parliament yesterday.
Eurostat data
According to preliminary data published today by the European Statistical Office (Eurostat), inflation in the Eurozone decreased to 1.8% in September. This is the lowest level in more than three years, mainly due to the decline in energy prices, which had increased significantly in previous years. A record level of 10.6% was reached in 2022, as fuel prices increased dramatically due to the war in Ukraine, where Frankfurt initiated the interest rate hike cycle.
Just yesterday, Lagarde said she was confident that the inflation rate would return to its base level. At a hearing at the Ministry of Economy and Trade, the president said, “We are determined to achieve the medium-term 2 percent inflation target on time. Interest rates will be kept sufficiently restrictive for as long as necessary to achieve our target.” Monetary Affairs Committee of the European Parliament. For official data, we have to wait for the Governing Council on October 17, where the famous interest rate cut will also be discussed and the final decision will be made there.
Step by step reviews
ECB member Olli Rehn warned, “The pace and scope of interest rate cuts will depend on the overall assessment of the Governing Council on a meeting-by-meeting basis.” Board of Governors and the governor of the Bank of Finland following the publication of Eurostat data. Therefore, common sense remains the watchword for now.
This feeling stems from the fluctuation in prices, especially food and energy, and was underlined yesterday by Lagarde herself, who warned that pressure on prices is expected in the fourth quarter of this year and that a return to the 2% target is expected only at the end of 2025. Investors increased their bets on a faster rate cut following Lagarde’s comments, with markets indicating an 85% chance of a rate cut on October 17, down from 25% at the beginning of last week.
Last September 12, the ECB made another interest rate cut of 0.25%, following the interest rate cut in June, increasing the deposit rate from 3.75% to 3.5%. Analysts predicted it would continue with quarterly cuts until it reached 2.5% in September 2025, but things may move faster now.
situation in italy
As for our country, according to Eurostat, the annual inflation increase in Italy in September is estimated to be 0.8%, which will be the fourth lowest inflation in the European Union. Ireland (0.2%), Lithuania (0.4%) and Slovenia (0.7%) are expected to have lower annual inflation rates, according to the EU statistics office. It is estimated that the highest growth rate will be recorded in Belgium and will be at 4.5%.
The sector expected to record the highest price increase is the services sector, at 4.0% (compared to 4.1% in August), followed by the food, alcohol and tobacco sector (2.4%, compared to 2.3% in August). following. the non-energy industrial goods sector (steady 0.4% compared to August) and finally the energy sector, which should show a price contraction of 6% (e.g. August prices had contracted 3% compared to the previous year).
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
