Eurozone inflation falls to 2.4% below expectations

  • The euro zone’s annual inflation rate slowed to 2.4% in November from 2.9% in October, well below expectations.
  • Core inflation fell to 3.6% from 4.2%, boosting expectations for an interest rate cut from the European Central Bank.

A general view shows a weekend crowd of people visiting a Christmas market in Aachen, Germany, on November 25, 2023. (Photo by Ying Tang/Noor Photo via Getty Images)

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Preliminary figures showed Thursday that the annual inflation rate in the euro zone fell to 2.4% in November from 2.9% in October.

Economists polled by Reuters expected a reading of 2.7%.

Core inflation – a measure closely monitored by the European Central Bank that excludes the volatile effects of energy, food, alcohol and tobacco – also came in lower than expected, falling to 3.6% from 4.2% in October.

Energy prices continued to record significant year-over-year declines, reaching -11.5% in November. Food, alcohol and tobacco contributed to the largest increase of 6.9%.

Headline inflation has now slowed significantly from peak levels of 10.6% in October 2022. Inflation in the euro zone’s largest economies, Germany and France, fell to 2.3% and 3.8%, respectively.

European Central Bank officials have repeatedly stressed that it is too early to declare victory over rising prices in the 20-member euro zone, as they monitor potential pressures from wage increases and energy markets.

Matthew Savary, chief European strategist at BCA Research, said traders would now be inclined to roll out their expectations about the timetable for the ECB’s first interest rate cut, but said the central bank’s concerns about labor market tightness still meant “later and not… “Soon.” Interest rate cuts.”

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Unemployment in the euro zone remained at a record low of 6.5% in October, despite the euro zone economy contracting in the third quarter, separate data released by statistics agency Eurostat on Thursday showed.

“For the ECB, signs of impending victory over inflation are increasing,” Bert Kolen, chief eurozone economist at ING, said in a note, adding that some of the impact from the current monetary tightening has yet to be felt.

“So the market is right to start looking at interest rate cuts for 2024. We think the first cut could happen before the summer.”

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