FRANKFURT, Germany (AP) 鈥� Inflation that has been plaguing Europeans declined sharply in September, strengthening hopes that consumers will eventually get relief from costlier groceries, vacations and haircuts 鈥� and that the European Central Bank won鈥檛 have to further restrict the economy by from already-record highs.
The annual rate was 4.3% this month, a drop from 5.2% in August. But are casting a shadow over prospects for beating inflation back down to the central bank鈥檚 target of 2%.
Core inflation, which excludes volatile fuel and , fell more than analysts expected 鈥� to 4.5% from 5.3%, according to data released Friday by the European Union's statistics agency, Eurostat. The ECB closely watches this figure to assess how inflation is coming down.
The fall in core inflation 鈥渞einforces our view that the ECB has finished raising interest rates,鈥� said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics. He predicted that the overall inflation rate would tumble to 3.5% by the end of the year.
4.7% in September, while food price inflation remained uncomfortably high at 8.8%.
Readings across the major economies that use the euro currency were a mixed bag. fell to 4.3% in September from 6.4% a month earlier, while Spain's increased to 3.2% from 2.4%.
Economists warn, however, that the large drop in Germany, the 20-country eurozone鈥檚 largest economy, was exaggerated by a statistical quirk 鈥� the end of a and a fuel subsidy in September 2022 that had raised consumer prices that month.
The latest inflation figures follow what may have been the final interest rate increase by the ECB in its swift series of hikes. It brought its benchmark deposit rate to a record high of 4% this month, up from minus 0.5% in July 2022.
ECB President Christine Lagarde said that if for a "sufficiently long duration,鈥� that would make a substantial contribution to returning inflation to 2%, a goal the bank does not expect to reach until 2025.
High prices have been because people's paychecks don鈥檛 go as far as they used to in covering their bills, forcing them to cut back on other spending.
Economic growth has in the first six months of the year, with some indicators pointing to a downturn in the current July-to-September quarter.
This burst of inflation was set off as the global economy rebounded from the COVID-19 pandemic, leading to shortages of parts and raw materials. It got worse when Russian invaded Ukraine, sending as Moscow to Europe.
Supply chain bottlenecks and energy prices have eased, but inflation has worked its way through the economy. Prices are higher for services such as haircuts and hotel stays, and workers have demanded pay raises to make up for their lost purchasing power.
The ECB has been trying to get a handle on inflation by raising interest rates, which make it more expensive to borrow for big purchases such as houses or new factory equipment to expand a business. That reduces demand for goods and, in turn, inflation.
But higher rates also can weigh on economic growth, leaving the central bank facing a balancing act over how far to go.
Many economists think the ECB has finished raising rates unless something drastic happens to keep inflation from falling further. That could be a further increase in oil prices, which have risen recently after major producers .
David Mchugh, The Associated Press
