Euro zone inflation rises to higher-than-expected 2%, weakening case for jumbo rate cut

In the Netherlands on Oct. 27, 2024, there was a display of pumpkins. Inflation in the 20-nation euro zone rose to 2% in October, exceeding expectations. The increase was mainly driven by higher prices in food, alcohol, and tobacco. Core inflation, excluding volatile components, remained steady at 2.7%. The euro strengthened against the U.S. dollar after the release of the inflation data. The European Central Bank may consider a half-percentage-point cut in interest rates at its next meeting in December. Despite better-than-expected growth in the euro area, analysts are still predicting further weakness ahead. The strong growth and low unemployment rates have led to speculation that a 50 basis point cut in interest rates may not be necessary.