Eurozone Inflation Aligns with Expectations in October

As the October inflation figures for the Eurozone are released, the numbers align with market expectations. According to data published by Eurostat, the Consumer Price Index (CPI) in October increased by 2% year-on-year. This rate was anticipated by the markets and matched the level of the previous year. On a monthly basis, the CPI rose by 0.3%, which again was consistent with market forecasts. Compared to the previous month, this increase followed a 0.1% decrease, indicating that inflationary pressures persist. When volatile components such as food and energy prices are excluded, core inflation was measured at 2.7% on a year-on-year basis. This was viewed as a result in line with both market expectations and the previous period. On a monthly basis, core CPI recorded a 0.3% increase, remaining stable compared to the prior month. The results remained unchanged when excluding alcohol and tobacco. The more narrow measure, which excludes food, energy, alcohol, and tobacco, also showed a year-on-year CPI change of 2.7% in October. On a monthly basis, there was a recorded increase of 0.2%. The final figures in this category met market expectations and confirmed the previous period's data. Overall, the Eurozone inflation figures suggest a more comfortable ground for the European Central Bank's monetary policy decisions, aligning with anticipated levels. This situation is likely to play a significant role in the bank's future interest rate decisions and economic support programs. Economists agree that maintaining price stability will support the region's economic recovery process. ECB member Panetta calls for lower interest rates and forward guidance. Fabio Panetta, a member of the European Central Bank (ECB) Governing Council and the Governor of the Bank of Italy, stated that the ECB should adopt a more forward-looking approach in setting its monetary policies and provide more guidance on the future of economic dynamics. In a speech at Bocconi University in Milan, Panetta noted that with the reduction of pandemic-related shocks and the normalization of inflation, the Eurozone economy has returned to "familiar waters." He emphasized that the ECB should now focus on the "slowdown of the real economy" and adjust official interest rates to "neutral or even accommodative levels," asserting that restrictive monetary conditions are no longer necessary in an environment where inflation is close to target and domestic demand is stagnant. He warned that without a sustainable recovery in the economy, inflation could fall significantly below the target. Need for more guidance on future monetary policy. Panetta indicated that after successfully navigating the uncertainties of the Eurozone economy, the ECB should change its "meeting-by-meeting" monetary policy approach dictated by the extraordinary conditions of the past two years. He highlighted the importance of returning to a more traditional, genuinely forward-looking monetary policy stance in the upcoming period. Panetta also noted that the ECB needs to provide more guidance on future monetary policy developments compared to recent periods. He stated that this approach would help businesses and households shape their expectations regarding future policy rates, thus supporting demand and the recovery of the real economy.