Inflation in Europe falls below 2pc, opening way for faster rate cuts

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FRANKFURT (AP) – Inflation in the 20 countries that use the euro fell to 1.8 per cent in September, below the European Central Bank’s (ECB) target of two per cent for the first time in more than three years as falling energy prices give consumers relief from a burst of inflation that at one point reached into double digits.

Yesterday’s official figure coupled with an anaemic growth outlook could pave the way for faster interest rate cuts from the ECB, which has already trimmed rates twice.

Inflation fell from 2.2 per cent in August, according to European Union statistics agency Eurostat. The last time inflation hit the ECB’s two per cent goal was in June 2021 when it was 1.9 per cent.

Economists have started to consider the possibility of a rate cut at the bank’s October 17 meeting. A few weeks ago, the expectations were that the central bank would wait until December before lowering borrowing costs again for consumers and businesses.

The bank must juggle the need to make sure inflation is under control, which would mean waiting longer to lower rates, against concerns over slow economic growth.

Higher central bank interest rate benchmarks combat inflation by raising rates throughout the economy, making it more expensive to borrow and spend.

The European Central Bank stands at right next to the river Main in Frankfurt, Germany. PHOTO: AP