Euro Zone Inflation Dips Below 2%: ECB Eyes Rate Cut

Inflation in the euro zone dropped below 2% in September, its lowest since mid-2021, strengthening the case for the European Central Bank (ECB) to cut rates this month. Contributing factors include falling energy costs and muted goods prices. The ECB's series of rate hikes since 2022 has been significantly effective in taming inflation.

Inflation in the euro zone dropped below 2% for the first time since mid-2021 in September, bolstering the argument for a European Central Bank (ECB) rate cut later this month as the battle against rising prices nears completion.

Eurostat data revealed that the inflation rate in the 20 countries using the euro fell to 1.8% in September from 2.2% in August, driven by decreases in energy costs and stable goods prices. Core inflation, closely monitored by economists, also dipped to 2.7% from 2.8%, falling short of expectations.

The ECB has aggressively raised interest rates to combat inflation, which peaked at over 10% in late 2022, fueled by post-pandemic recovery, high energy costs, and fiscal support. ECB President Christine Lagarde has hinted at another rate cut this month amid favorable price trends, reflecting a shift in market expectations. Both investors and economists now anticipate further rate cuts by the year-end.

(With inputs from agencies.)