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2025-10-31 18:03:56
[Eurozone Inflation Alarms: Accelerating Services Inflation Offsets Lower Energy Prices] ⑴ Eurozone inflation dipped slightly to 2.1% in October, remaining close to the European Central Bank's (ECB) 2% target, in line with expectations of a moderate economic recovery. ⑵ Core inflation remained unchanged at 2.4%, exceeding market expectations of a slowdown, as services inflation accelerated from 3.2% to 3.4%. ⑶ The decline in industrial goods inflation was completely offset by rapid growth in services prices, with lower energy costs being the main driver of the slight overall inflation decline. ⑷ The ECB kept interest rates unchanged on Thursday, believing that inflation is on its target trajectory and that the most serious risks to economic growth have diminished. ⑸ Market expectations indicate that the probability of the central bank cutting interest rates again before mid-next year is only 40%, with most economists believing that the current rate-cutting cycle has ended. ⑹ In the year ending in June, the ECB had cumulatively cut interest rates by 2 percentage points, and the lagged effects of policy transmission continue to impact the real economy. ⑺ Some policymakers are concerned that inflation risks are tilted to the downside, predicting that inflation will fall below 2% early next year due to the statistical base effect, which may change corporate pricing expectations. (8) Another view holds that the economy is performing better than expected, with multiple surveys showing improved economic activity, which should alleviate economic concerns and limit the downside risk of inflation.
