Eurozone inflation cooled in September, with the month-on-month rate experiencing the largest decline since January 2024, and the year-on-year increase falling below the ECB's 2% target. Analysts believe that the possibility of an ECB rate cut in October has significantly increased.
On Tuesday, October 1st, Eurostat released the following data:
<ul>
<li>Eurozone harmonized CPI fell by -0.1% month-on-month in September, with an expected 0% and a previous value of 0.1%.</li>
<li>Eurozone harmonized CPI rose by 1.8% year-on-year in September, in line with expectations but lower than the previous value of 2.2%.</li>
<li>Eurozone core harmonized CPI increased by 2.7% year-on-year in September, matching expectations but slightly lower than the previous value of 2.8%.</li>
</ul>
<h2>Market Raises Expectations of ECB Rate Cut in October</h2>
With inflation dropping to 1.8% this month, below the ECB's 2% target, ECB President Christine Lagarde expressed growing confidence in the inflation rate returning to the target of 2%.
During a hearing at the European Parliament's Economic and Monetary Affairs Committee, she stated: &#34;Looking ahead, with energy prices having fallen significantly earlier, the inflation rate may temporarily rise in the fourth quarter of this year, but the latest developments have strengthened our confidence that the inflation rate will return to target in a timely manner.&#34;
She added: &#34;We will take this into account at our next monetary policy meeting in October.&#34;
Today, ECB Governing Council member Rehn also adopted a dovish tone, indicating that the ECB's monetary policy stance is becoming more accommodative.
Global economists at Bank of America have increased their expectations of an ECB rate cut in October.
Economists at Deutsche Bank also brought forward their forecast for the ECB's next rate cut from December to October on Tuesday.
According to LSEG data, earlier on Tuesday, the market was pricing in a 25 basis point rate cut by the ECB in October .

Eurozone harmonized CPI in September rose by 1.8% year-on-year, below the ECB's 2% target. Analysts believe that the possibility of a rate cut by the central bank in October has significantly increased

- Eurozone inflation cooled in September, marking the largest month-on-month decline since January 2024, with a year-on-year increase below the ECB's 2% target.  
- The harmonized CPI for September showed a month-on-month initial value of -0.1% and a year-on-year initial value of 1.8%.  
- Market expectations for an ECB rate cut in October have risen significantly, with analysts predicting a 25 basis point reduction.

Rate cut in October possible? Eurozone CPI fell by 0.1% month-on-month in September, the largest decline since January 2024