Eurozone inflation slows to just 2.4% in November

Eurozone inflation slowed much more than expected in November, according to figures released Thursday by Eurostat, raising hopes that the European Central Bank (ECB) may move to cut interest rates sooner than predicted.

The annual change in consumer prices slowed to just 2.4% this month, the lowest rate of inflation since January 2021, closing in on the ECB's target for headline inflation of 2%. This was down from 2.9% in October and below the 2.7% expected by economists.

Food inflation fell to 6.9% from 7.4%, services price growth declined to 4.0% from 4.6%, non-energy industrial goods inflation eased to 2.9% from 3.5%, while energy price deflation fell further to -11.5% from -11.2%.

Month-on-month, consumer prices actually declined by 0.5% after increasing 0.1% the month before.

Meanwhile, core annual inflation – which excludes volatile items like food and energy – eased to 3.6% from 4.2% the month before and under the 3.6% rate forecast by analysts.

"While much of this disinflation can be associated with the recent slump in energy prices, the decline in core CPI does show continued headway being made by the ECB," said analyst Joshua Mahony from Scope Markets.

"With the target rate now in touching distance, there is a good chance we see the focus shift towards questions over whether we will see the ECB overshoot the target by driving inflation well below 2%. [...] With the ECB now staring at a distinct possibility of below target inflation within Q1 2024, markets will more than likely start bringing forward expectations over the first rate cut (currently priced for April)."