Eurozone inflation fell below the 2 percent target for the first time in more than three years in September, signaling faster interest rate cuts from the European Central Bank.
The harmonized index of consumer prices posted an annual increase of 1.8 percent compared to a 2.2 percent rise in August, flash data from Eurostat showed Tuesday.
Inflation fell below 2 percent for the first time since June 2021. Economists had forecast inflation to moderate to 1.9 percent.
At the same time, excluding energy, food, alcohol and tobacco, core inflation eased only marginally to 2.7 percent from 2.8 percent in the prior month.
Data showed that the annual fall in energy prices doubled to 6.0 percent from 3.0 percent. Non-energy industrial goods prices logged a steady growth of 0.4 percent.
Food, alcohol and tobacco prices rose at a slightly faster pace of 2.4 percent following a 2.3 percent gain. Services cost gained 4.0 percent after rising 4.1 percent.
On a monthly basis, the HICP was down 0.1 percent.
With growth under pressure now, it seems that the door is open for the ECB to move faster, ING economist Bert Colijn said.
While it does not seem like a done deal, it does bring the October meeting into play for a possible step up in easing, the economist added.
Capital Economics economist Franziska Palmas said it now looks very likely that, after a temporary rebound in the headline rate due to base effects in the next three months, inflation will stay below target in the coming year.
Accordingly, the economist expects the ECB to cut its deposit rate by 25 basis points in October to 3.25 percent.
In June, the ECB had cut its rates for the first time since 2019. After opting for a pause in July, the bank again reduced its key rates by 25 basis points in September.