Eurozone inflation slows more than expected in October

(Sharecast News) - The annual rate of consumer price inflation in the Eurozone slowed to its lowest level in two years this month, according to data released Tuesday by Eurostat, raising hopes that the European Central Bank (ECB) may loosen monetary policy sooner than expected next year. The single-currency consumer price index (CPI) was up 2.9% on last year in October, significantly down from 4.3% in September, on the back of continued energy price deflation and easing food price inflation.



The consensus forecast was for a slowdown to 3.1%.

Food, alcohol and tobacco prices were up 7.5% year-on-year, down from 8.8% in September, while energy prices dropped 11.1% after a 4.6% decline.

Excluding these more volatile items, core inflation slowed to an annual rate of 4.2%, from 4.5% - more or less as expected.

Analysts at Oxford Economics said the drop in core inflation marries with "growing weakness" in demand across the Eurozone, evidenced by Tuesday's GDP figures which showed that the bloc contracted by 0.1% during the third quarter.

"All of this tallies with our assessment of an earlier-than-expected ECB policy pivot. We think the ECB will start with rate cuts already in early Q2 2024. Despite that, we expect headline inflation to dip below target next year."

The ECB held interest rates steady last week after 10 consecutive rate hikes, with the key rate staying at 4% - a decision that is widely believed to have marked the end to its current tightening cycle.