Eurozone inflation falls to three-year low and below half ECB target
Inflation in the Eurozone fell to its slowest pace in three years in September, official figures showed today, raising fresh concerns over the direction of the single currency area’s economy.
Read more: Falling fuel prices hold UK inflation at three-year low
Prices grew at just 0.8 per cent in the year to September, below initial estimates and far under the European Central Bank’s (ECB) desired rate of close to but below two per cent.
At its last meeting in February, the ECB unveiled a major stimulus package in an effort to kickstart the Eurozone’s struggling economy, including relaunching its giant bond-buying programme.
The weak reading for inflation in September will reignite the intense debate about policy among the upper echelons of the central bank. Officials were deeply divided over restarting bond purchases and Germany’s representative on the ECB board Sabine Lautenschlaeger has since quit.
Trade data also released today showed exports to the rest of the world falling by 2.2 per cent year on year in August. The fall highlights the ongoing difficulties of the zone’s manufacturing sector.
On another measure of inflation, which strips out the more volatile categories of energy and unprocessed food, inflation rose to 1.2 per cent in September from 1.1 per cent a month earlier.
“The Eurozone has been a source of concern to us for 20 consecutive months in light of alarming signs of broad-based deceleration,” said investment managers at investment firm Unigestion in a note. They said this has made the zone an unattractive place to invest.
“But things seem to be changing,” they said. “We see (very) early signs of macro stabilisation and consumption growth looks firm.”
“With the ECB’s new President [Christine Lagarde] pushing for more fiscal spending, an extremely low euro and a lower exposure to the trade war, we think European growth assets could become more appealing.”
(Image credit: Getty)