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Further decrease in Eurozone inflation rates

According to the latest HCPI report, consumer prices in the Eurozone rose by 2,9%, year-on-year in October. This is the lowest inflation rate in the past two years, indicating a continued slowdown in inflation processes since reaching peak values in October last year. It's worth noting that in October 2022, the overall inflation rate was 10.6%, while in September this year, it lowered to 4.3%. Therefore, the Eurozone is gradually approaching the desired inflation target of 2% due to the central bank's tighter monetary policy, which encompasses high interest rates.

The core inflation rate, which excludes energy and food, was at 4.2%, year-on-year. This difference between the overall and core inflation accounts for the 11.2% drop in energy prices. Let me remind you that energy costs were record high during the Summer and Autumn of 2022 as a result of Russia's invasion of Ukraine. Since then, Europe has diversified its energy sources, enabling it to better adapt to such stress factors. However, food prices continue to rise significantly, at a rate of 7,4%, although this is lower than September's figure of 8.8%.

The level of inflation within the Eurozone varies greatly, ranging from 7.8% in Slovakia to -1.7% in Belgium. The reason for this variation is mainly due to the rising fuel prices in Slovakia, Slovenia, and some other countries. Additionally, the prices of food, alcohol, and tobacco in, e.g., Slovakia, have also increased by approximately 9%.

The market was not surprised by this HCPI dynamics, however, it can be considered a positive signal ahead of the European Central Bank's next interest rate decision. This data may support the decision to maintain interest rates at their current level.

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