Eurozone inflation surges past forecast, hints ECB cut caution
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The news: Eurozone inflation increased to 2% in October, up from September’s 1.7% and surpassing estimates of 1.9%, Eurostat data showed.
The number: Food prices surged 2.9%, while energy costs decreased at a slower pace. Core inflation, excluding volatile items, remained steady at 2.7%, missing expectations of a slight drop.
The context: The European Central Bank (ECB) has cut rates three times this year, with the most recent reduction last month, amid cooling inflation and slower economic growth in the eurozone.
The fresh data on Thursday was taken as encouraging some caution in future rate cuts by the central bank.
However, a separate report from Eurostat showed unemployment in the single currency area held steady at 6.3% in September.
Data on Wednesday showed Eurozone GDP grew 0.4% between July and September, a higher-than-expected rate but trailing the US.
Europe’s largest economy, Germany, registered a big inflation jump to 2.4%, up from 1.8% in September, while France saw a smaller 10 basis point rise to 1.5%.
What they said: “The objective is in sight, but I am not going to tell you that inflation is under control,” ECB President Christine Lagarde told Le Monde in an interview published Thursday. “We also know that inflation will rise in the coming months, simply because of base effects.”
Kamil Kovar, economist at Moody’s Analytics said: "While usually without much significance, today’s unemployment reading, combined with stronger growth and hotter inflation, will provide yet another argument for the hawks in their battle about the pace of cuts."
The sources: Bloomberg, Eurostat on inflation , Eurostat unemployment , AFP
