Dutch pumpkin lineup on October 27, 2024.
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Preliminary data released by Eurostat on Thursday showed that the inflation rate in the 20 euro zone countries rose to 2% in October.
Economists polled by Reuters had forecast an overall figure of 1.9%. The overall data for September was revised down to 1.7% from 1.8% on October 17, which was lower than market expectations.
The biggest driver of overall price increases came from food, alcohol and tobacco, where price increases accelerated from 2.4% to 2.9%.
Core inflation, which excludes volatile components such as energy prices, was unchanged at 2.7%, slightly above expectations of 2.6%. Services inflation – a key measure of domestic price pressures – also held steady at 3.9%.
After the news was announced, the euro rose 0.15% against the dollar, hitting a two-week high of $1.087.
The latest inflation data released on Thursday is considered crucial in determining whether the European Central Bank will consider implementing a sharp half-percentage point interest rate cut at its next meeting in December.
The central bank has cut interest rates three times so far this year, each time by a quarter of a percentage point, taking the central bank’s key interest rate from 4% to 3.25%.
The market currently expects another 25 basis points interest rate cut in December.
Eurozone growth
Traders were also considering the latest euro zone growth data, which showed better than expected Expanded 0.4% in Q3despite analysts predicting further weakness ahead.
European Central Bank said at the October meeting The deflation process is “on track” and the sluggish economic activity in the euro area has strengthened its confidence that inflation will not recover significantly.
Ballinger Group foreign exchange market analyst Kyle Chapman said in a report that “increased inflation, strong economic growth and record low unemployment in the euro area have eliminated bets on a 50 basis point rate cut.” ”
Chapman said that while consumer price growth is expected to pick up at the end of the year, service sector inflation will remain sticky.
“A big concern underpinning the risk of inflation running below target is a potential turning point in the labor market, where the surprisingly resilient labor market could be at risk of a sharp reduction in labor hoarding if consumption deteriorates. This concern is no longer as relevant,” Chap said. Mann emphasized that he was referring to this week’s growth and employment data.
“Sequential adjustments of 25 basis points are the way to go. The need to rescue the shrinking eurozone economy with below-neutral rates is disappearing from the discussion, negating the need to accelerate the easing cycle, especially in services Inflation is hard to get out of trouble.”
