Euro zone inflation lowest since July 2021 in Oct
GDP shrinks slightly in Q3

FRANKFURT, Oct 31 Reuters Inflation in the euro zone is falling fast and the economy has begun contracting, data showed on Tuesday, illustrating the dual impact of a steady diet of European Central Bank interest rate hikes.

Prices rose by just 2.9 in October, their slowest pace since July 2021, a Eurostat flash reading showed, a time when the ECB was still worried about inflation getting stuck below its 2 target.

But the brisk decline from doubledigit figures just a year ago is coming at a cost the euro zone economy shrank by 0.1 in the three months to September, according to a separate Eurostat release, and is flirting with a recession.

The two sets of data mean the ECB has almost certainly finished raising interest rates, which are at record highs after an unprecedented streak of 10 consecutive hikes, and will now watch their impact play out before making further moves.

We expect a plateau in rates at current levels, in the context of slowing inflation and economic growth, followed by cuts from the middle of next year, Daniele Antonucci, chief investment officer at Quintet Private Bank, said.

Headline inflation started falling sharply last month as the massive increase in energy prices recorded a year earlier set a higher base for the annual comparison an effect set to fade or even reverse in upcoming readings.

A measure of inflation that excludes energy, food, alcohol and tobacco…