Business

Euro zone inflation slows more than expected, paving way for ECB rate cut

Consumer price growth across the single currency bloc moderated to 1.7 per cent in September from 2.2 per cent the previous month

European Central Bank (ECB) President Christine is expected to announce a further rate cut on Thursday. Photograph: Getty
European Central Bank (ECB) President Christine is expected to announce a further rate cut on Thursday. Photograph: Getty
Eoin Burke-Kennedy
Thu Oct 17 2024 - 11:42

Euro zone inflation slowed more than expected in September appearing to cement the case for a further interest rate cut by the European Central Bank (ECB).

Consumer price growth across the single currency bloc moderated to 1.7 per cent in September from 2.2 per cent the previous month, according to Eurostat. An initial flash estimate, published earlier this month, put inflation at 1.8 per cent.

Ireland was estimated to have the lowest inflation rate, as measured by the harmonised index of consumer prices (HICP), of any euro zone state at 0.0 per cent down from a previous estimate of 0.2 per cent.

The figures come as the ECB is expected to implement another quarter point interest rate cut.

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Frankfurt is expected to lower its deposit rate from 3.5 per cent to 3.25 per cent as inflation retreats faster than expected and business activity across the euro area slows at a worrying pace.

According to the ECB’s own forecasts published last month, growth would slow to just 0.2 per cent in the third quarter and to 0.8 per cent for 2024 as a whole.

This would be the third ECB rate cut this year and the first back-to-back cuts announced by the central bank in 13 years.

The move will instantly benefit tens of thousands of tracker mortgage holders in the Republic. Domestic lenders are also likely to come under pressure to reduce fixed and variable rates before the end of the year.

Markets have largely priced in today’s anticipated rate cut and focus will now turn to ECB president Christine Lagarde’s post-meeting comments.

Ms Lagarde and colleagues are unlikely to drop clear hints about future moves on Thursday, repeating their mantra that decisions will be made “meeting by meeting” based on incoming data.

But most ECB watchers think the die is cast for cuts at every meeting until the spring.

“Given the loss in growth momentum and the moderation in inflation we now expect the ECB to cut rates by 25 basis points at each of the upcoming four meetings,” UBS economist Reinhard Cluse said.

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Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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