Preliminary data published by Eurostat showed that the eurozone annual inflation slowed sharply in August, falling below the ECB's target level (2%) for the first time since mid-2021 and reaching its lowest level since April 2021. Meanwhile, core inflation unexpectedly fell to its lowest level since April. Overall, today's data is likely to strengthen the case for another ECB interest rate cut at the October meeting. Markets now price an 85% chance of a rate cut on Oct. 17, up from 25% at the start of last week. They also price just over 50 basis points of moves until the end of the year.
According to the report, the consumer price index rose by 1.8% per year after increasing by 2.2% per year in August. Economists had expected growth of 1.9% per annum. Meanwhile, on a monthly basis, the consumer price index declined by 0.1% after rising by 0.1% in August.
Eurostat reported that the core consumer price index - excluding energy, food, alcohol & tobacco - rose by 2.7% per year, slowing compared to August (+2.8%). Consensus estimates suggested an increase of 2.8%.
The data showed that the annual growth of the overall consumer price index was due to an increase in the cost of services (+4.0% vs. +4.1% in August), food, alcohol & tobacco (+2.4% vs. +2.3%) and non-energy industrial goods (+0.4% vs. 0.0%). Meanwhile, energy prices fell by 6% after declining by 3% in August.