Eurozone inflation back up to 2% target as energy deflation eases

31st Oct 2024 10:28

(Sharecast News) - Eurozone inflation met the European Central Bank's target level of 2% in October after rebounding strongly from its lowest rate in three years the previous month.

According to data from Eurostat on Thursday, the harmonised index of consumer prices rose at a year-on-year pace of 2.0% this month, up from 1.7% in September, the lowest reading since April 2021.

The market had widely expected price growth to accelerate to 1.9%. But, according to Oxford Economics, the upside surprise likely "won't spook the ECB".

"The slight uptick in eurozone inflation in October was expected following the base effect-driven dip in September. Given weak underlying growth dynamics, we think inflation will undershoot ECB forecasts next year and allow for a sustained pace of rate cuts in H1 2025," said Rory Fennessy, senior economist at Oxford Economics.

Prices in the services sector rose by 3.9% year-on-year, unchanged from September, while inflation in food, alcohol and tobacco accelerated to 2.9% from 2.4%. Non-energy industrial goods prices rose 0.5%, up from 0.4% previously, but energy price deflation eased to just -4.6% from -6.1% the month before.

The core rate of inflation, which strips out volatile items like energy, food, alcohol and tobacco, held steady at 2.7% over the month; the consensus forecast was for a fall to 2.6%.

In other news, the eurozone unemployment rate held steady at 6.3% in September, surprising analysts who had pencilled in a slightly tick-up to 6.4%.