Euro area inflation rate fell below ECB's 2% target in September

According to Eurostat flash estimate the annual inflation rate in the euro area is expected to fall to 1.8 % in September from 2.2 % in August. This marks the first time in three years that inflation has fallen below the European Central Bank's (ECB) target.

Service prices recorded a year-on-year increase of 4 % in September, down slightly from 4.1 1 % in August. The inflation rate for food, alcohol and tobacco rose slightly from 2.3 % in August to 2.4 % in September. Meanwhile, the inflation rate for non-energy manufactured goods remained stable at 0.4 %. Energy prices continued to decline, with negative growth deepening from -0.3 % in August to -0.6 % in September.

Among the euro area countries, Belgium recorded the highest annual inflation rate of 4.5 %, up from 4.3 % in the previous month. In contrast, Ireland posted the lowest inflation rate of 0.2 per cent, down sharply from 1.1 per cent in August.

"Eurozone inflation fell to 1.8 %, with core inflation falling to 2.7 % in September," He told Bert Colijn, Chief Economist of ING.

"With inflation approaching the target faster than expected, the ECB's concerns appear to be shifting towards a lacklustre growth environment," He added.

Colijn expects inflation to rebound from the trough in the fourth quarter, but said the ECB's 2% target remains achievable in the medium term. He stressed that a slowdown in growth due to weakening demand could pose further challenges.

Since the summer, concerns about inflation have shifted to concerns about economic growth. Colijn noted that with growth now under pressure, the ECB may be forced to speed up its policy response.

As inflation in the eurozone moderates, the ECB has begun to ease its restrictive monetary policy, which has been in place since September 2023. The central bank has cut key interest rates twice by 25 basis points since June and confirmed that future rate adjustments will be data dependent.

This was repeated by the ECB President on Monday Christine Lagarde: "The new data available at the time of the September Governing Council meeting reinforced our confidence in a timely return of inflation to our 2% target."

Xinhua/ gnews - RoZ_07

PHOTO - Xinhua/Zhang Fan