A woman takes a selfie, with the Eiffel Tower in the background, on Surcouf avenue in Paris, on July 23, 2024, ahead of the Paris 2024 Olympics.
Mauro Pimentel Afp | Getty Images
Eurozone inflation fell to a three-year low of 2.2% in August, flash figures from statistics agency Eurostat showed on Monday, boosting expectations for a September rate cut from the European Central Bank.
The drop from 2.6% in July was in line with the forecast of economists polled by Reuters.
The core rate – excluding the more volatile components of energy, food, alcohol and cigarettes – fell to 2.8% in August from 2.9% in July, also in line with a Reuters poll.
The euro continued to slide against sterling after the release, trading 0.1% lower at 0.8408 pounds. The euro nudged 0.04% higher against the US dollar to $1.1083 as investors braced for a September rate cut by the Federal Reserve in the first step towards monetary easing in the current cycle.
It comes after the price increase in Germany, the largest economy in the euro area, cooled more than expected to 2% for the month, in the euro zone harmonized basis.
Economists at ING expect euro zone core inflation to remain stubbornly above 2.5% for the rest of the year amid a glut in goods and services.
Markets have fully priced in the ECB to cut interest rates by another 25 basis points in September, after the institution cut its first rate in June, and for another 25 basis point cut before the end of the year.
Kyle Chapman, a foreign exchange market analyst at the Ballinger Group, said that there are details about the release that the ECB policymakers will follow, especially the service inflation at 4.2%.
“The positive headlines are only for energy price effects, and mask the fact that real progress in underlying pressures has been made here,” Chapman said in a note.
“Currently at the highest level since last October, services inflation has been stuck in the 4% area for almost a year now and has been heading in the wrong direction since the spring.”
