Italy's inflation rate has dropped below 1%, increasing pressure on the European Central Bank (ECB, Financial) to accelerate rate cuts. Data released by Italy's statistical agency indicated that the Consumer Price Index (CPI) rose by just 0.8% year-over-year in September, matching market expectations and down from a 1.2% increase in August. This decrease in inflation is primarily due to declines in energy, transportation, and communication costs.
This trend aligns with the overall slowdown in inflation across the Eurozone's 20 countries. Last week, data from France and Spain also fell below the ECB's 2% inflation target. Consequently, investors are betting on the ECB cutting rates in October, which would be the third rate cut this year.
Market analysts expect Germany's data, set to be released later today, to show a similar decline in inflation. The overall Eurozone data will be published tomorrow, with analysts forecasting an inflation rate of 1.8%.
ECB President Christine Lagarde is scheduled to speak to EU parliament members later today, her first opportunity to comment on last week's strong investor bets on an October 17 rate cut. Currently, money markets predict an almost 80% chance of a rate cut in October.
Despite the easing price pressures, some hawkish ECB officials remain hesitant to support accelerated rate cuts, citing August's service sector inflation exceeding 4%. However, Italy would welcome a rate cut in October. Italian Prime Minister Giorgia Meloni has stated that looser monetary policy is needed to help Europe's economic growth. The Italian government aims for approximately 1% economic growth in 2024 but requires additional measures to reduce its debt burden.
