Markets Disappointed With Eurozone Inflation Report

Forex News

Inflation pressure in the Eurozone unexpectedly weakened in September, increasing concerns for the European Central Bank, which prepares to curb economic stimulus measures. The European Central Bank plans to end a 2.6 trillion euro ($3 trillion) bond purchase scheme at the close of the year and sees its first rate hike sometime in the fourth quarter of next year.

Today’s data showed, that Eurozone consumer price inflation rose to 2.1% yoy in September, from 2% a month ago. The indicator was in line with forecasts. Meanwhile, core CPI, which excludes alcohol and tobacco costs, fell to 0.9% in September from 1% in August, well short of expectations. The core CPI marked the lowest level in 5 months.

The consumer price pressure have a direct bearing on the interest rate and other monetary policy decisions of the European Central Bank. The fact that a rise in employment and wages does not appear to be translating into underlying price pressures adds to the argument that slack in the economy may be bigger than was visible until now.