Inflation in the Euro Zone, which consists of European Union countries that have adopted the Euro, climbed higher than expected, leading to calls for a moderate approach to interest rate cuts by the European Central Bank (ECB).
Euro Zone inflation in October came at 2% compared to 1.7% in the month prior and above the 1.9% estimated by economists. The surge was mainly caused by a jump in energy and food prices.
Excluding the volatile energy and food prices, inflation has maintained a steady pace of 2.7%, although economists expected a slight dip to 2.6%.
ECB President Christine Lagarde admitted that inflation is still not under control, and further climb is expected in the coming months. However, she also predicts that the target of 2% will be achieved on a stable basis in 2025.
“The objective is in sight, but I am not going to tell you that inflation is under control,” Lagarde said in an interview with French media outlet Le Monde. “We also know that inflation will rise in the coming months, simply because of base effects.”
The recent data had some economists and officials arguing for a moderate approach to further rate cuts. ECB has cut its interest rates three times since July, with another cut expected in December. Traders are currently betting that ECB’s rates will drop to 2% by the end of the next year from the current 3.25%.