Eurozone inflation slowed slightly to 2.1% in October from 2.2% the previous month, in line with analysts’ expectations, according to Eurostat data. Falling energy costs offset rising prices in the services sector, while core inflation remained at 2.4%.
The ECB kept interest rates unchanged on Thursday and insisted inflation was now close to its 2% target. The bank expects inflation to fall below 2% in 2025 before returning to the target in 2027, a view supported by the ECB’s survey of companies and consumers.
The steady inflation outlook reinforces expectations that the ECB has ended its rate-cutting cycle. Markets see only a 40% chance of another rate cut by the middle of next year, after the bank cut rates by 2 percentage points in a year.
However, some policymakers have warned that the risks are now tilted to the downside, with price pressures expected to fall below 2% early next year. This could affect business price expectations and keep inflation subdued for longer.
In contrast, recent economic surveys have shown activity picking up and sentiment improving, providing confidence that the risk of a slowdown may be receding, and helping to reduce concerns about deflation.
