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Eurozone inflation rose to 2% in October, meeting the European Central Bank's target and reducing the likelihood of a half-point rate cut in December.
The annual data from EU statistics agency Eurostat was slightly higher than the 1.9% expected by analysts polled by Reuters.
“The goal is in sight, but I am not going to say that inflation has been defeated yet,” ECB President Christine Lagarde said in an interview with French daily Le Monde published Thursday ahead of the October figures. spoke.
Combined with better-than-expected third-quarter growth data released Wednesday, rising inflation undermines the case for a deep interest rate cut in December, a move some analysts have begun predicting in recent weeks. . According to Eurostat, the regional unemployment rate remained stable at 6.3% in September, the lowest level on record.
“All of these data clearly support a more hawkish policy,” T. Rowe Price economist Tomasz Wiladek said in a note to clients, referring to tight monetary policy that emphasizes low inflation over growth. ” He added that traders are currently pricing in a 0.5 point cut in December to be unlikely.
The euro rose after the announcement, rising 0.1% against the US dollar to $1.087.
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The ECB cut borrowing costs by a quarter of a percentage point for the second month in a row in October after inflation fell faster than expected, reinforcing concerns about weak economic conditions.
Core inflation, which excludes volatile food and energy prices, is considered a better measure of underlying price pressures and is closely monitored, but remained stable at 2.7% and is consistent with the ECB's medium-term This is still well above the target.
Service price inflation, another factor the central bank is watching closely, remains rising at 3.9%. Lagarde told Le Monde newspaper that “cautiousness is justified” in easing interest rates, noting that service sector inflation remains well above the ECB's inflation target.
Last month's annual inflation rate was 1.7%, below the ECB's target for the first time in more than three years.
The ECB said it expected headline inflation to rise in the final months of the year, partly due to the temporary drop in energy prices a year ago.
Additional reporting by Ian Smith in London
