Eurozone inflation drops to 2.9% in third quarter

The eurozone's rate of inflation has slid to 2.9% from 4.3% in September — its lowest rate in over two years.

While analysts had expected the rate to remain above 3%, instead it is closer to the 2% target of the European Central Bank (ECB).

The ECB raised interest rates for an unprecedented 10th consecutive time in September to combat historic surges in prices in the 20-nation single currency bloc.

But signs of weakness in the economy as well as ebbing price pressures prompted the ECB to leave interest rates unchanged this month, the first time that rates have held unchanged since July 2022.

Eurozone inflation reached its peak of 10.6% in October last year following Russia's invasion of Ukraine, which sent energy prices spiraling.

Germany's weak economy weighs on eurozone

Meanwhile, economic growth in the bloc shrank by 0.1% over the July to September period, having shown a modest 0.2% growth in the second quarter.

The ECB's rate-hiking campaign and the poor performance of its biggest economy, Germany, contributed to the contraction.

Germany has been hit hard by elevated energy costs, a sluggish manufacturing sector, and high interest rates. France, the EU's second biggest economic center, only grew by 0.1%, and Italy's economy stagnated in the third quarter, the data showed.

The Eurostat data showed that Austria recorded the sharpest contraction in the bloc, at 0.6%.

mds/rc (AFP/Reuters)