Euro Zone Inflation Cools to 2.4% in November as Economy Slows
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Annual inflation in the euro zone dropped to 2.4% in November from 2.9% in October, according to flash figures released on Thursday. This figure came in lower than the 2.7% reading expected by economists polled by Reuters.
The European Central Bank’s closely-watched measure of core inflation, which excludes the volatile effects of energy, food, alcohol, and tobacco, also saw a decrease, dropping to 3.6% from October’s 4.2%. ECB officials have been wary of declaring victory over price rises in the 20-member euro zone bloc, citing the need to monitor potential pressures from wage increases and energy markets.
Bert Colijn, senior euro zone economist at ING, emphasized that the cooling inflation is a result of “sluggish demand” and noted that this trend should keep inflation on track toward 2%, a target set by the ECB.
The decline in headline inflation is significant, especially when compared to the peak levels of 10.6% observed in October 2022. In the euro zone’s largest economies, Germany and France, inflation has dropped to 2.3% and 3.8%, respectively. Mathieu Savary, chief European strategist at BCA Research, suggested that traders might be inclined to revise their expectations for the timeline of the first ECB rate cut, although he also pointed out that the central bank’s concerns over labor market tightness could delay any rate cuts.
Separate data released by statistics agency Eurostat on Thursday revealed that unemployment in the euro area remained at a record low of 6.5% in October, despite a contraction in the euro zone economy in the third quarter.
This latest data reflects an overall cooling of inflation in the euro zone, providing some relief amid concerns of ongoing price rises in the region. The figures also point to potential challenges in the euro zone economy, particularly in relation to demand, which may have broader implications for monetary policy going forward. As the ECB continues to navigate these developments, market observers will keenly monitor future data releases to gauge the trajectory of economic conditions in the euro zone.
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