Europe’s Inflation Slows to 2.1% as Lagarde Signals “No Rush to Cut”
Europe’s long battle with inflation may be entering a quieter phase, but policymakers in Frankfurt are far from ready to lower their guard.
New data released Friday showed consumer prices across the euro area rising 2.1% in October compared with a year earlier — a slight slowdown from September’s 2.2% but still above the European Central Bank’s comfort zone. While the headline figure suggests inflationary pressures are softening, the details tell a more complicated story.
Core inflation, which filters out energy and food costs, held stubbornly at 2.4%. Services — the most domestic and persistent source of price pressure — actually accelerated to 3.4%, defying expectations of a broader cooldown.
A Pause That Feels Permanent
The ECB’s decision to keep interest rates unchanged this week was largely validated by the data. Having lifted borrowing costs to 2%, officials have now paused for a third straight meeting, insisting that monetary conditions are tight enough to gradually bring prices closer to target.
President Christine Lagarde described the policy stance as “appropriate for now,” though she admitted the outlook remains unusually uncertain. Central bankers are wary of easing too early, especially with underlying inflation refusing to budge.
Some economists, including Commerzbank’s Joerg Kraemer, caution against assuming the inflation fight is over. “It may look like victory at first glance,” he said, “but persistent core inflation argues against cutting rates anytime soon.”
Mixed Picture Across the Bloc
National reports tell a fragmented story. Spain’s prices picked up momentum again, Germany’s decline proved milder than expected, while France and Italy continued to post weak readings well below the euro-zone average. Such divergence complicates policymaking for the ECB, which must balance the needs of economies moving at different speeds.
Even so, growth figures suggest that Europe’s economy has shown surprising resilience. Output expanded by 0.2% in the third quarter — twice what analysts had predicted — driven mainly by a stronger-than-expected performance in France. Germany and Italy, however, barely avoided contraction.
External Pressures Cloud the Outlook
The ECB’s challenge is made harder by events beyond Europe’s borders. The trade measures introduced by U.S. President Donald Trump have distorted global supply chains, boosting costs for some European producers while flooding the region with cheaper imports.
According to an internal ECB report summarizing recent talks with businesses, several manufacturers see downward pressure on prices as goods originally bound for the U.S. get redirected to Europe. Others warned that these disruptions could hurt investment and output in 2026 if tariffs persist.
Inflation May Dip, but Stability Isn’t Assured
The ECB expects inflation to dip below 2% next year, before rising again toward that level by 2027. New projections in December — which for the first time will include estimates for 2028 — may show whether policymakers believe the recent moderation is sustainable.
Bloomberg Economics’ David Powell said the latest data “cements the case” for the ECB to keep rates steady well into 2026. “Core measures are still too high, and the inflation problem hasn’t been fully neutralized,” he said. “The real cooling effect from the new U.S. tariffs will likely show up next year.”
For now, Lagarde and her colleagues appear content to hold their ground. Inflation may be easing, but uncertainty — not optimism — is what continues to define Europe’s economic moment.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
Alexander Zdravkov is a person who always looks for the logic behind things. He has more than 3 years of experience in the crypto space, where he skillfully identifies new trends in the world of digital currencies. Whether providing in-depth analysis or daily reports on all topics, his deep understanding and enthusiasm for what he does make him a valuable member of the team.
