Euro zone inflation rose to 2.2 per cent in September, the first time it has gone above the European Central Bank’s (ECB) 2 per cent target since April.
Wednesday’s flash estimate of the annual inflation figure for September was in line with the 2.2 per cent forecast by economists in a Reuters poll.
There is consensus among economists and traders that the central bank will keep interest rates unchanged at 2 per cent for the third meeting in a row when rate-setters convene at the end of this month.
Analysts suggested that the rise in inflation supported the view that the ECB had neared the end of its rate-cutting cycle.
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Francesco Pesole, foreign exchange strategist at ING, said Wednesday’s figure vindicated “the ECB’s cautious stance and markets’ reluctance to price in any more cuts”.
The euro was stable, up 0.1 per cent against the dollar at $1.175.
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Policymakers in Frankfurt had previously halved borrowing costs in eight steps, starting in June 2024.
Traders have scaled back expectations of further interest rate cuts since the EU struck a trade deal with the US in late July.
Derivatives contracts give a less than 50 per cent chance of another quarter-point cut by this time next year, according to swaps markets.
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ECB president Christine Lagarde told journalists last month that “inflation is where we want it to be”.
Core inflation for September, excluding volatile food and energy prices, remained steady at 2.3 per cent. The closely watched figure for services inflation – a gauge for domestic price pressures that has remained well above the ECB’s medium-term 2 per cent target for more than three years – edged up to 3.2 per cent, compared with 3.1 per cent in August. – Copyright The Financial Times Limited 2025
