Inflation in Eurozone cools to 1.7% in September

Year-on-year inflation in the eurozone slowed to 1.7% last month, slightly lower than previously estimated, according to official data published Thursday. 

It is the first time in more than three years that the inflation rate in the single currency area has fallen below the European Central Bank’s (ECB) target of 2%.

Interest rate cuts expected

The new data was released hours ahead of an expected rate cut by the ECB.

The slowdown of the September inflation rate was due to changing energy costs, which fell by 6.1% compared to the same month last year.

“Victory against inflation is in sight,” French central bank governor and ECB rate-setter Francois Villeroy de Galhau said last week.

“A cut is very likely,” he said of Thursday’s meeting, adding that “it will not be the last”.

Consumer prices soared in the wake of the coronavirus pandemic and Russia’s invasion of Ukraine, with inflation peaking at 10.6% in October 2022. That prompted the ECB to aggressively raise rates. But the bank’s policymakers have already cut rates twice this year in response to the easing situation. 

The Frankfurt-based ECB’s focus is now shifting to dealing with weak economic growth in the 20-country eurozone.

According to the institution’s own forecasts published last month, growth is expected to slow to 0.2% in the third quarter and 0.8% in the whole of 2024. 

nm/wmr (Reuters, AFP)