Latest Eurozone Inflation Data Reveals Lowest Levels in Two Years – Exploring Implications

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Eurozone inflation has reached its lowest level in nearly two years, raising hopes that the surge in consumer prices, which is considered the largest of its kind in a generation, is dissipating rapidly. This development may lead to the European Central Bank putting a halt to interest rate hikes.

After the release of better-than-expected regional and French inflation data, European government bonds rallied and equity markets gained strength.

According to Eurostat, the statistical agency of the European Union, consumer prices in the Eurozone rose by 4.3% in the year leading up to September, compared to 5.2% in August. Economists surveyed by Reuters had predicted a 4.5% increase.

The last time inflation was this low was in October 2021.

Core inflation, which excludes energy and food and is closely monitored by the ECB for underlying price pressures, also declined more than anticipated, dropping to 4.5% in September from 5.3% in August.

In September, consumer prices in the Eurozone rose by 0.3% compared to the previous month, a slower pace than the 0.5% increase recorded in August.

Following the turmoil on European bond markets on Thursday, yields on Italian 10-year government bonds fell by 0.15 percentage points to 4.76% on Friday, down from their highest level in ten years.

Similarly, German 10-year bond yields declined by 0.1 percentage points to 2.85%, after hitting a ten-year high in the previous trading session.

The euro strengthened by 0.4% against the dollar, reaching $1.0603. In equity markets, Europe’s Stoxx 600 index climbed 1%, Germany’s Dax increased by 0.6%, the FTSE 100 in London grew by 0.6%, and France’s Cac 40 index gained 0.7%.

This story is still developing.