Eurozone inflation confirmed at 2.9% in October, as rate-cut hopes rise

Secondary estimates for the Eurozone consumer price index in October confirmed the initial figures on Friday, showing that inflation saw a big drop, reaffirming hopes that the European Central Bank may look to cut interest rates early next year.

Headline annual inflation was unchanged from the initial estimates at 2.9% for October, which was down from 4.3% in September, according to Eurostat.

Core inflation was line with the initial estimate at 4.2%, down from 4.5% the previous month.

"Looking ahead, the central trend in our forecast still is that inflation is set to undershoot the ECB’s forecasts materially in the near term, and in particular for next year as a whole," said economist Claus Vistesen from Pantheon Macroeconomics.

Vistesen said there will likely be a rebound in headline inflation in December due to a drop in energy prices the year before, but price pressures should begin to ease after that.

As for core inflation, which excludes energy, Pantheon estimates a fall to 3.5% in December and a further fall to 2.5% by the end of the first quarter of 2024.

"This is more quickly than the ECB expected in September, guiding our view that the ECB will have room to cut its policy rate earlier than markets expect, in March."