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People look at the banking district skyline with the Commerzbank building (2ndR) during sunset in Frankfurt am Main, western Germany, on September 25, 2023. (Photo by Kirill KUDRYAVTSEV / AFP) (Photo by KIRILL KUDRYAVTSEV/AFP via Getty Images)
Kirill Kudryavtsev | Afp | Getty Images
Inflation across the euro zone dropped to a two-year low of 2.9% in October, according to preliminary data released Tuesday, down from 4.3% the previous month and below a consensus estimate of 3.1% from a Reuters poll of economists.
Core inflation — which excludes volatile food and energy prices — dropped to 4.2% year-on-year in October from 4.5% in September.
European Union statistics agency Eurostat also revealed that the euro zone economy contracted by 0.1% in the third quarter, according to flash estimates, below consensus estimates for GDP to be unchanged from the previous quarter.
The 20-country common currency bloc has been grappling with high inflation for the past 18 months, with the consumer price index peaking at 10.6% in October 2022.
The European Central Bank responded with a run of 10 consecutive interest rate hikes that took its key rate to a record high of 4%, before opting to pause last week despite upside risks to energy costs as a result of the unfolding Israel-Hamas war.
The ECB expects the euro zone economy to grow by just 0.7% this year, by 1% in 2024 and 1.5% in 2025.
Europe’s largest economy, Germany, recorded a 0.1% quarterly fall in GDP for the third quarter, slightly better than the 0.3% decline forecast in a Reuters poll of economists. The economy shrank 0.8% on a price-adjusted basis from the same period last year.
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