Inflation across the Eurozone dropped to 2.1% in October, welcome news for the European Central Bank (ECB) as the figure closes in on its 2% target.
Prices in the Eurozone are currently taking a different trajectory to those in the UK and the US, where inflation sits at 3.8% and 3% respectively.
The strength of the Euro this year has helped to contain the worst effects of US tariffs, keeping a lid on the price of imports to some extent for European businesses and consumers and combatting the potential for imported inflation.
Energy prices remain broadly stable after months of declines, while food and industrial goods inflation show only modest movement. However, the persistence of services inflation suggests that underlying domestic costs remain sticky, posing a challenge for policymakers eager to declare a final victory over inflation.
This fall in inflation follows the ECB’s decision to hold rates steady at its October meeting. With inflation under control and growth across the region yet to pick up, the Bank faces a delicate balancing act: avoiding premature easing of rates while preventing a deeper slowdown in economic activity.
For governments across the Eurozone, the figures offer a mixed message. Easing inflationary pressures supports real incomes, but the lack of clear disinflation momentum limits room for large-scale fiscal stimulus in the upcoming 2026 national budgets.
The October figures suggest that price stability is on the horizon for the Eurozone, but there remains work to be done. With services costs stubborn and growth subdued, both policymakers and markets will tread cautiously — recognising that the final stretch back to 2% may prove the hardest.
