Eurozone inflation hits 5-month high: ECB expected to stay cautious

Price pressures crossed nan eurozone picked up gait successful September, reaching their highest level since April, but nan emergence is improbable to change nan European Central Bank's (ECB's) wait-and-see approach.

Annual ostentation successful nan eurozone roseate to 2.2% successful September, up from 2.0% successful August, according to Eurostat’s flash estimate. The reference was successful statement pinch economist expectations. On a month-on-month basis, prices edged up 0.1%, mirroring August's figure.

Core inflation, which excludes volatile nutrient and power prices, held dependable astatine 2.3% for nan 5th period running, offering reassurance that underlying value pressures are not gaining momentum, moreover arsenic header figures rise.

Among inflation’s cardinal drivers, services led nan battalion pinch a 3.2% yearly increase, somewhat up from 3.1% successful August.

Food, intoxicant and baccy prices roseate 3.0%, easing from 3.2%, while non-energy business equipment were unchangeable astatine 0.8%. Energy prices continued to shrink, but astatine a slower rate, down 0.4%, compared to 2.0% successful August.

Estonia posted nan highest ostentation complaint astatine 5.2%, followed by Croatia and Slovakia astatine 4.6% each. At nan different extremity of nan spectrum, Cyprus recorded nary yearly change, and France saw a mild summation of 1.1%.

Monthly trends were much striking successful immoderate areas. Italy and Portugal led pinch value increases of 1.3% and 1.0% respectively, suggesting immoderate localised acceleration.

What does this mean for nan ECB?

At its September meeting, nan ECB chose to support liking rates unchanged, maintaining nan deposit installation astatine 2.00%. Projections published past showed ostentation expected to mean 2.1% successful 2025, easing to 1.7% successful 2026, earlier nudging backmost up to 1.9% successful 2027. Core ostentation is seen gradually declining complete nan aforesaid horizon.

President Christine Lagarde said nan ECB is “in a bully place” to clasp rates steady, pinch nary urgency to either tighten aliases easiness argumentation further.

The latest ostentation figures look to validate that stance.

According to Riccardo Marcelli Fabiani, elder economist astatine Oxford Economics: “The outlook has not changed and still intelligibly points to ostentation descending acknowledgment to cooling costs growth, debased power prices, a stronger euro, and contained demand-side pressures.”

He added: “The roadworthy intelligibly leads downhill; we’ve conscionable been driving up a short ramp. But fixed nan ECB’s caller hawkish tone, nan September ostentation uptick will reenforce its condemnation that it’s excessively early to see cutting rates.”

Markets wide expect nan Governing Council to support rates unchanged astatine its adjacent gathering connected 30 October.

Markets oculus US shutdown risks

The euro climbed to 1.1750 against nan US dollar connected Wednesday, buoyed by a broader selloff successful nan greenback pursuing nan US national authorities shutdown.

The shutdown, which could furlough hundreds of thousands of workers and hold economical information releases — including nan cardinal nonfarm payrolls study owed connected Friday — weighed connected investor sentiment, pinch futures connected Wall Street declining.

Equity markets crossed Europe were mostly muted. The EURO STOXX 50, Germany’s DAX, and France’s CAC 40 each notched up 0.3%, and Italy’s FTSE MIB edged 0.1% lower.

The broader EURO STOXX 600 performed better, up 0.5%. Among individual movers, Sartorius led gains pinch a 9% surge, followed by Sanofi and Novo Nordisk, up 4% and 3.3% respectively.

Defence stocks lagged: Rheinmetall dropped 2.3%, Leonardo fell 2%, and Thales mislaid 1.4%.