Eurozone inflation falls to 2.2% in August

Unlock Digest Editor for free

FT Editor Roula Khalaf picks her favourite stories in this weekly newsletter.

Euro zone inflation fell sharply to 2.2% in August, reinforcing expectations that the European Central Bank will cut interest rates next month.

Friday’s figure was in line with a 2.2 percent forecast in a Reuters poll and last month’s 2.6 percent.

It comes after Germany and Spain. reported a larger-than-expected decline in August in this week’s figures.

France also reported a fall in inflation early Friday, albeit lower than expected.

Markets are betting the ECB will cut its benchmark interest rate to 3.5 percent by a quarter at its meeting on September 12. inflationary close to the bank’s 2 percent target.

The European Central Bank cut interest rates by 0.25 percentage points in June, while the Bank of England did the same this month.

The US Federal Reserve is expected to cut its benchmark interest rate for the first time in more than four years in September.

This month, ECB chief economist Philip Lane signaled that further rate cuts in Europe were likely.

He warned that keeping interest rates “too high for too long would lead to inflation remaining below target over the medium term”, while cautioning that the ECB’s 2% target was still uncertain to return to.

ECB executive board member Isabel Schnabel said on Friday she was also open to a cut, but said the central bank “should proceed gradually and cautiously” in lowering interest rates.