Inflation in the EU decreased slightly, but remained almost at a record high

In September, recorded level of Euro zone consumer inflation was insignificantly lower than awaited, but still remained at a record high, thereby confirming the market expectations about the interest rate hike.

According to the European Union's statistics office Eurostat estimations, in 19 countries that use the euro as their main currency there was an increase in consumer prices by 1.2% month-on-month and 9.9% year-on-year, which is lower than expected level of 10%.

A rise in energy prices took 4.9 percentage points from the total year-on-year rate, a rise in groceries – 2.47 points, and in services – 1.80 points.

Overall, prices rose by 0.9% in a month and by 6% in a year, excluding volatile prices on groceries and energy from the estimation.

When the calculation was narrowed down to excluding alcohol and tobacco as well with other aforementioned categories, increase in prices was 1% and 4.8% per month and per year, correspondingly.

The European Central Bank (ECB) plans to maintain inflation at the level of 2%, and in pursuit of this goal, it continues to raise interest rates for keeping prices down.

Some policymakers have already justified the need for yet another rate hike by 75 basis points at the ECB’s upcoming meeting on October 27. Collectively, over the past two meetings, the interest rate has been increased by 125 basis points. Previously, the ECB has never reached that pace of monetary policy tightening.

Markets predict that the deposit rate will rise from 0.75% to approximately 2% by the end of the year, then supposedly rise to 3% by the next spring, and after that it’s likely to stabilize.