Euro Area: inflation
Date: Wednesday, 1 October at 7.00pm AEST
Last month, in August, headline inflation in the Euro Area remained at 2% for a third straight month. Core inflation, which strips out food and energy, also held steady at 2.3% for a fourth consecutive month.
Earlier this month, the ECB kept its three key interest rates on hold as widely expected. This decision followed eight interest rate cuts by the ECB totalling 175 basis points (bp) between June 2024 and June 2025. With inflation at the ECB’s 2% medium-term target and the Eurozone economy showing resilience, no changes were made.
This month, the preliminary expectation is for headline inflation to rise to 2.2% year-on-year (YoY) in September and for the core measure to remain at 2.3%. Such an outcome would likely reinforce expectations for the ECB to remain on hold until the middle of 2026.
The European interest rate market is pricing in only a slim 10% chance of another ECB 25 bp rate cut before year-end and only a modest 33% chance of a 25 bp rate cut by the middle of 2026.