Inflation falls below ECB’s 2% target for first time since 2021 – UOB Group

Preliminary figures showed eurozone inflation eased further to 1.8% in September from 2.2% in August as energy prices continued to fall. This is the first time in three years that headline inflation has fallen below the European Central Bank’s (ECB) target of 2%-3%, notes UOB Group economist Lee Sue Ann.

Energy prices continue to fall

“Inflation in the euro area fell to 1.8% in September from 2.2% in August, falling below the ECB’s 2% target, according to preliminary data. Core inflation, which excludes more volatile energy, food, alcohol and tobacco prices, came in at 2.7%.

“While we are aware that the risk of an October rate cut certainly looks more likely than before, we again maintain our view of an ECB cut only when policymakers meet in December for the last time this year.”

“We believe that broadly watched services inflation, which eased slightly to 4.0% in September from 4.1% in August, is still elevated for the ECB. In addition, inflation dynamics are quite different in the euro area countries.”