Euro Zone Inflation Hits Lowest Level Since October 2021
Euro zone inflation has fallen to 4.3% in September, marking its lowest level since October 2021. This comes after the annual reading in August showed inflation at 5.2%. Additionally, the month-on-month inflation rate dipped from 0.5% to 0.3%.
Furthermore, core inflation, which excludes energy, food, alcohol, and tobacco, dropped to 4.5% year-on-year in September from 5.3% in August. This decrease indicates that the rise in prices is less pronounced when these volatile sectors are excluded from the calculation.
The European Central Bank (ECB) recently hiked interest rates to a record level of 4%. The ECB suggests that these rates may be at sufficiently high levels to bring inflation to its target in the medium term. They project inflation to average 5.6% this year, falling to 3.2% in 2024 and 2.1% in 2025.
However, officials caution against expectations for rate cuts. French central bank Governor Francois Villeroy de Galhau describes it as “premature” to bet on the timing of the first cut. The ECB forecasts modest economic growth for the euro zone, with a projected growth rate of 0.7% this year, followed by 1% and 1.5% over the next two years.
There are varying inflationary pictures across European nations. Germany is experiencing a price rise of 4.3%, while France has inflation of 5.6% and Spain at 3.2% in September. Slovakia and Slovenia face higher inflation rates of 8.9% and 7.1%, respectively.
One risk to the ECB’s inflationary forecasts is the recent surge in oil prices. Higher energy costs can quickly translate into higher prices for consumers, potentially pushing inflation even higher.
Overall, the downward trend in euro zone inflation and the efforts of the ECB to manage the situation are essential factors for both businesses and consumers to monitor.
