Leaves in the vineyards turn yellow at the end of the harvest season in Seven Mountains along the Rhine River in Bonn, Germany, October 25, 2024.
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Preliminary data released by Eurostat on Thursday showed that the inflation rate in the 20 euro zone countries rose to 2% in October.
Economists polled by Reuters had forecast an overall figure of 1.9%. The overall data for September was revised down to 1.7% from 1.8% on October 17, which was lower than market expectations.
The biggest driver of overall price increases came from food, alcohol and tobacco, where price increases accelerated from 2.4% to 2.9%.
Core inflation, which excludes volatile components such as energy prices, remained unchanged at 2.7%, slightly above expectations of 2.6%. Services inflation – a key measure of domestic price pressures – also held steady at 3.9%.
Shortly after the news was released, the euro rose 0.17% against the dollar and was trading at a two-week high of $1.0873.
The latest inflation data released on Thursday is considered crucial in determining whether the European Central Bank will consider implementing a sharp half-percentage point interest rate cut at its next meeting in December.
The central bank has cut interest rates three times so far this year, each time by a quarter of a percentage point, taking its key interest rate from 4% to 3.25%.
The market currently expects another 25 basis points interest rate cut in December.
Traders were also considering the latest growth data from the euro zone, which showed a better-than-expected 0.4% rise in the third quarter, although analysts predicted further weakness ahead.
The European Central Bank said at its October meeting that sluggish economic activity in the euro zone had strengthened confidence that inflation would not recover significantly.
This is a breaking news story and will be updated soon.
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