Eurozone inflation fell this month to its lowest level in two years, suggesting the European Central Bank’s (ECB) steady interest rate hikes were succeeding in curbing runaway prices albeit at the cost of economic growth.
Consumer prices in the zone rose by 4.3 percent in September, the slowest pace since October 2021, from 5.2 percent one month earlier, according to Eurostat’s flash reading published yesterday.
Inflation excluding food, energy, alcohol and tobacco — closely watched by the ECB as a better gauge of the underlying trend — fell to 4.5 percent from 5.3 percent, the biggest drop since August 2020.
Photo: Reuters
These readings were likely to strengthen the ECB’s conviction that it had raised interest rates enough to bring down inflation to its 2 percent target by 2025, after being wrong-footed by a 2021 surge.
“Base effects played a key role in explaining the sharp fall in inflation, but the figures also suggest that underlying inflationary pressures are becoming less intense,” said Diego Iscaro, head of European economics at S&P Global Market Intelligence. “The figures reinforce the view that interest rates have likely reached their peak in the current tightening cycle.”
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