BRUSSELS, Belgium—The eurozone’s annual inflation rate rebounded more than expected in October due to rising food costs, official data showed on Thursday, but remains in line with the European Central Bank’s two-percent target.
Despite the higher inflation reading, analysts expected the ECB to still cut rates at the next meeting in December as it focuses more on addressing Europe’s sluggish growth.
The ECB hiked rates after consumer prices soared following the 2022 outbreak of war in Ukraine but has this year reduced borrowing costs as inflation cooled.
Year-on-year consumer price increases in the 20-country single currency area reached 2.0 percent in October, rising from 1.7 percent in September, the EU’s official data agency said.
The September reading had been the first time the figure fell below the ECB’s two-percent target in more than three years.
Inflation accelerated more than expected by analysts surveyed by FactSet and Bloomberg, who predicted it would increase to 1.9 percent in October.
But core inflation, which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the bank, remained stable at 2.7 percent in October, Eurostat said.
The core inflation figure was higher than expected by analysts who predicted it would fall to 2.6 percent this month from 2.7 percent in September.
The ECB previously said it expected inflation to rise before falling, while economists said the bank would not budge from a cut at the next policy meeting on Dec.12.
“While it is far from a done deal, we still think that by December the Governing Council is likely to conclude that policy needn’t be restrictive for much longer and that a 50bp (basis-point cut) would be appropriate,” said Andrew Kenningham, chief Europe economist at Capital Economics research group.
Meanwhile, some experts said the ECB would look at other data before a decision.
“The ECB will likely assess future data releases before deciding on the path of monetary policy” at the next meeting, said economist Sara Pineros at the Centre for Economics and Business Research.
Thursday’s inflation rise was driven by food and drink price increases, which reached 2.9 percent in October, well above the 2.4 percent increase registered in September.
Meanwhile energy prices fell at a slower rate of 4.6 percent, compared with a 6.1 percent drop a month earlier.
Official data on Wednesday showed the single currency area grew by 0.4 percent between July and September this year, a greater-than-expected figure, but still paltry compared to the United States during the same period.
The United States on Wednesday reported growth of 0.7 percent in the third quarter from the previous three months.
Services inflation in the eurozone, which had been accelerating in recent months, also remained stable at 3.9 percent in October, the data showed.
Inflation in the eurozone’s biggest economy, Germany, rose sharply in October to reach 2.4 percent from 1.8 percent in October on the back of higher food prices.
In France meanwhile, consumer price rises ticked up slightly to 1.5 percent this month, from 1.4 percent in September.
Slovenia recorded a zero percent inflation rate in October, according to Eurostat.
Other Eurostat data published on Thursday showed the unemployment rate in the single currency area remained stable at 6.3 percent in September. AFP
