The Eurozone experienced a slower pace of price growth in September compared to August, according to the European Union statistics body Eurostat. The consumer price index (CPI) for the bloc rose by 4.3% compared to the same period last year, confirming earlier estimates and meeting economists’ expectations. Notably, core prices, which exclude food, alcohol, tobacco, and energy, increased by 4.5% on a yearly basis, with services being the primary driver of the price rises. Energy prices, on the other hand, decreased compared to the previous year.
Divergence in Inflation Rates within Eurozone
Inflation rates varied significantly among the 20-member currency union. The Netherlands reported slightly lower prices, while Spain recorded an inflation rate of 3.3%. France and Italy exceeded the average with price rises of 5.7% and 5.6% respectively. Hungary saw the most substantial surge in prices, exceeding 12%.
Implications for European Central Bank’s Monetary Policy
The slower overall inflation rate could potentially influence the European Central Bank’s (ECB) decision on interest rates. It may result in the bank maintaining its current rates, putting an end to a prolonged cycle of rate hikes. According to strategists Jussi Hiljanen and economist Marcus Widen at SEB Research, the recent increase in the deposit rate to 4.00% is likely the final one in this cycle. However, they caution that a decrease in rates may not occur until late next year, especially if inflation eases at a slower pace in the early months of 2024.