Eurozone inflation rose to 2 per cent in October, meeting the European Central Bank’s target and bolstering the case for a smaller quarter-point rate cut in December.
The annual figure from Eurostat, the EU’s statistics bureau, was slightly above expectations of 1.9 per cent from analysts polled by Reuters.
Last month, the figure was 1.7 per cent, falling below the ECB’s target for the first time in more than three years.
The rise in inflation follows stronger-than-expected growth data for the third quarter released on Wednesday.
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The figures undermine the case for a big rate cut from the ECB, which had previously been under pressure to make such a move due to signs of growing economic headwinds in the currency bloc.
Following Thursday’s inflation number, markets attach a roughly 80 per cent chance of a quarter-point cut, compared with about 60 per cent before the growth figures.
Unemployment in the bloc in September was stable at an all-time low of 6.3 per cent, according to Eurostat.
“All of these data clearly support a more hawkish policy,” Tomasz Wieladek, an economist at T Rowe Price, wrote in a note to clients.
The euro edged higher following the release, climbing 0.1 per cent against the US dollar to $1.087.
The ECB reduced borrowing costs by a quarter percentage point for the second month in a row in October after inflation fell quicker than expected and concerns over weak economic dynamics had intensified.
Core inflation, which excludes volatile food and energy prices and is considered a better gauge of underlying price pressures, remained steady at 2.7 per cent, still well above the ECB’s medium-term target.
Services price inflation remained elevated at 3.9 per cent.
The ECB has said it expects headline inflation numbers in the final months of the year to rise, partly due to the impact of a temporary fall in energy prices a year ago. – Copyright The Financial Times
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