Eurozone inflation to exceed expectations

Economists have predicted inflation rates will exceed the European Central Bank's 2 percent goal in the foreseeable future, based on findings of a survey released by Germany's Ifo Institute for Economic Research on Wednesday.

According to Ifo's quarterly analysis, conducted together with the Swiss Economic Policy Institute, economists forecast inflation in the eurozone will hit 2.6 percent this year.

"Inflation is also expected to exceed the European Central Bank's target of 2 percent in the medium term," Ifo researcher Niklas Potrafke said in a statement.

"Due to these stagnating inflation expectations, central banks could hold back on further interest rate cuts."

Last month, the inflation rate across the 20 countries using the euro currency fell to 1.8 percent down from 2.2 percent in August, marking the first time it has dipped beneath the ECB's 2 percent goal since 2021.

Inflation pressures eased across various sectors, including energy, which saw significant deflation at-6 percent.

However, ECB forecasts released last month indicated a significant economic slowdown in the eurozone, with the third-quarter growth projected at just 0.2 percent.

Germany, the bloc's largest economy, is facing particular challenges, with official GDP growth forecasts now suggesting a 0.2 percent economic contraction this year, potentially marking its second consecutive year in recession.

Among eurozone countries, inflation this year is anticipated to reach 2.4 percent in Germany, 3.1 percent in Austria and 2.3 percent in France, according to Ifo.

Despite this, there is a growing perception that consumer prices are being effectively managed.

The ECB is expected to implement another interest rate reduction on Thursday, with President Christine Lagarde indicating that increased confidence in declining inflation would be factored into the bank's decision, Reuters reported.

In September last year, the ECB hiked its interest rates to a record 4 percent since the euro's inception, aiming to curb persistent inflation across the eurozone. Since reaching this peak, the ECB has implemented two rate cuts this year, one in June and another during its most recent meeting last month.

"Victory against inflation is in sight," Bank of France Governor Francois Villeroy de Galhau, a member of the ECB's rate-setting governing council, said last week.

"A cut is very likely," he told Franceinfo radio, adding that "it will not be the last".