Eurozone inflation falls below 2% in Sept, boosting rate cut hopes

Eurozone inflation fell below the European Central Bank's 2% target for the first time since 2021, boosting hopes of further interest rate cuts in the single currency bloc.

A flash estimate from European Union statistics body Eurostat said annual inflation across the euro area was 1.8% in September 2024, down from 2.2% in August and its lowest since April 2021.

A sharp fall in energy costs was the main driver, with prices down 6%, meaning they were lower than September last year. Services inflation edged down to 4% from 4.1% in August, while food, alcohol & tobacco inflation rose to 2.4% from 2.3%.

"We think that the ECB is slightly more likely than not to proceed with a rate cut at the October meeting. But with services inflation remaining stubbornly high, the decision to cut or stay put is on a knife edge," said Rory Fennessy, senior economist at Oxford Economics.

"The underlying details of September inflation do not overly bolster calls for an October rate cut, but the council may just about find a majority to cut given the weak growth outlook."

"The final manufacturing PMIs underscore the very weak growth outlook facing the eurozone. With the exception of a rising Spanish manufacturing PMI, the eurozone industrial sector is very much in the doldrums."

Reporting by Frank Prenesti for Sharecast.com