(Bloomberg) — Italian inflation sank below 1% — heaping more pressure on the European Central Bank to accelerate interest-rate cuts.
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Consumer prices rose just 0.8% from a year ago in September compared with 1.2% in August, Italy’s statistics institute said Monday. The deceleration was mainly due to energy, transport and communication costs, and was in line with a Bloomberg survey of analysts.
The figures are part of a general retreat across the 20-nation euro zone, where readings for France and Spain, released Friday, plunged below the ECB’s 2% target. In response, investors have ramped up bets that October will bring the year’s third reduction in borrowing costs.
Regional data ahead of Germany’s national numbers later Monday showed moderation across six states. Figures for the bloc as a whole are due Tuesday, with analysts polled by Bloomberg estimating inflation of 1.8%.
What Bloomberg Economics Says…
“Underlying inflation declined to 1.8% in September from 2.3% in August, against our expectations for a small increase in the core figure. The drop in underlying inflation in Italy provides an additional piece of good news for the ECB, confirming the picture of a well advanced disinflation process.”
—Simona Delle Chiaie, economist. Click here for full REACT
ECB President Christine Lagarde will address European Union lawmakers at 3 p.m. in Brussels — her first opportunity to comment on last week’s huge buildup in investor bets for rates to be lowered again on Oct. 17. Money markets now price the chance of a move at just below 80%.
Despite price gains cooling, some ECB hawks have been reluctant to back faster policy easing, citing elevated services inflation that exceeded 4% in August.
But Italy would welcome an October rate cut — an outcome money markets reckon has an 80% chance of materializing. Prime Minister Giorgia Meloni says looser monetary policy is needed to help European economies grow. Her government is targeting expansion of about 1% in 2024 but needs more to shrink a debt pile exceeding 130% of output.
–With assistance from Mark Schroers, Giovanni Salzano and Joel Rinneby.
(Updates with Bloomberg Economics.)
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