What’s going on here?

Eurozone's inflation rate hit 2% in October, up from September's 1.7% and overtaking initial predictions of 1.9%.

What does this mean?

October's inflation increase in the eurozone was primarily attributed to base effects in food and energy. While these components pushed up the headline rate, core inflation remained unchanged at 2.7%. This steady core rate suggests that underlying inflation pressures, particularly in core services excluding transport, are weakening. Meanwhile, the European Central Bank's weighted median inflation indicator inched up, and domestically generated inflation pressures showed a slight decline, mirroring softer labor market trends (see the chart).

Why should I care?

For markets: Tracking inflation's market impact.

Trade tensions pose an upside risk to the inflation outlook. Despite these complexities, the ECB is poised to continue its monetary tightening cycle, likely aiming for a deposit rate hike to 2.25% by April 2025. Investors may be watching out for a recalibration among traders regarding growth prospects and interest rate-sensitive sectors.