In the euro zone, total inflation stood at 1.8% in September and fell below the 2% threshold for the first time since June 2021. This drop from 2.2% in August to 1.8% is in line with to expectations and comes mainly from the energy component whose prices contracted by 6% year-on-year (-3% in August). Conversely, the rise in food prices accelerated slightly in September due to unprocessed goods.
In addition, core inflation is also down at 2.7% (2.8% in August), in line with expectations thanks to the fall in services inflation. This went from +4.1% in August to 4% in September.
“However, this downward movement is a little disappointing because it only cancels out the August increase and inflation in this component remains very high compared to its long-term average. Goods inflation is stabilizing at 0.4%”, reports Juliette Cohen, strategist for CPRAM (CPR Asset Management).
According to her, “overall inflation reached the ECB target in September but, however, the mission is not completely completed for the ECB.”
First of all, inflation should start to rise again at the end of 2024 due to less favorable base effects in energy. But above all, disinflation in services has been at a standstill for several months because of some components (insurance in particular) which are delayed in reflecting cost inflation in their selling prices.
Despite this downside, this should not prevent the ECB from carrying out a further rate cut of 25 basis points at its meeting on October 17. Christine Lagarde recently estimated that the European economy was facing “headwinds” and that the latest data “reinforced the ECB’s confidence in achieving its objective”.
source : AOF
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