This marks the first time in three years that inflation has fallen below the European Central Bank's target.
BRUSSELS, Oct. 1 (Xinhua) -- The eurozone's annual inflation rate is projected to drop to 1.8 percent in September, down from 2.2 percent in August, according to a flash estimate released on Tuesday by Eurostat. This marks the first time in three years that inflation has fallen below the European Central Bank's (ECB) target.
Service prices recorded a year-on-year increase of 4 percent in September, slightly down from 4.1 percent in August. The inflation rate for food, alcohol, and tobacco rose slightly from 2.3 percent in August to 2.4 percent in September. Meanwhile, the inflation rate for non-energy industrial goods remained steady at 0.4 percent. Energy prices continued to decline, with negative growth deepening from -0.3 percent in August to -0.6 percent in September.
Among eurozone countries, Belgium recorded the highest year-on-year inflation rate at 4.5 percent, up from 4.3 percent the previous month. In contrast, Ireland reported the lowest rate at 0.2 percent, a significant drop from 1.1 percent in August.
"Eurozone inflation has declined to 1.8 percent, with core inflation dropping to 2.7 percent in September," noted Bert Colijn, chief economist at ING.
"With inflation moving towards target faster than expected, the ECB concerns seem to be shifting towards the lackluster growth environment," he added.
Colijn expects inflation to rebound in the fourth quarter but said the ECB's 2-percent target remains achievable in the medium term. He emphasized that slowing growth, due to weakening demand, could pose additional challenges.
Since the summer, concerns about inflation have shifted to worries about economic growth. Colijn noted that, with growth now under pressure, the ECB may be prompted to accelerate its policy response.
With the eurozone's inflation moderating, the ECB has started to unwind its restrictive monetary policies, which had been in place since September 2023. The central bank has reduced key interest rates by 25 basis points twice since June, affirming that future rate adjustments will be data-dependent.
ECB President Christine Lagarde reiterated on Monday: "The new data available at the time of the September Governing Council meeting reinforced our confidence in the timely return of inflation to our 2 percent target."■