Eurozone inflation falls below target for the first time in three years

By Steve Goldstein

Inflation in the eurozone has fallen below target for the first time in three years in data that reinforce the likelihood the European Central Bank will cut interest rates again later in October.

Eurostat reported that annual inflation in the eurozone fell to 1.8% in September, from 2.2% in August.

The core rate that excludes food, alcohol and tobacco fell a tenth, to 2.7%. Both measures met economist expectations.

"With price pressures cooling more rapidly than expected, and with the recent round of PMI surveys pointing to a sharp loss of economic momentum in September, coupled with lingering downside economic risks, the stars are all aligned for the data-dependent Governing Council to pull the trigger on another rate cut, just five weeks after the previous policy meeting," said Michael Brown, senior research strategist at Pepperstone.

Ahead of the data, Deutsche Bank had already changed its stance to argue the ECB will cut at the Oct. 17 meeting.

European Central Bank President Christine Lagarde said Monday that the economy was facing headwinds.

The euro (EURUSD) was modestly down on the day, ,at $1.1111. The yield on the 2-year German bund BX:TMBMKDE-02Yfell 2 basis points to 2.05%.

-Steve Goldstein

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10-01-24 0521ET

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