06:12 AM EDT, 10/01/2024 (MT Newswires) -- Eurozone inflation dropped to 1.8% year-over-year in September as core inflation fell to 2.7%, noted ING on Tuesday.

The European Central Bank knew that Tuesday's inflation print would come in weak as President Christine Lagarde mentioned it at the September press conference but it still came in a tad weaker than most analysts had expected, stated ING. While a bounce back in Q4 has been expected, the question is to what extent this can materialize as gasoline prices have been dropping quickly on the back of falling oil prices.

With core inflation slowly dropping at this point, it looks like the 2% target in the medium term is achievable, wrote the bank in a note. Recent survey data has confirmed slowing selling price expectations from businesses.

This is mainly because of weak demand as the same surveys indicate that growth is slowing from an already modest pace in Q2. Since the summer, concerns about inflation have made way for concerns about economic growth, according to ING.

As the ECB seems quite convinced that inflation is on track towards 2%, the question is now how fast it wants to move interest rates back to neutral, added the bank. If it keeps interest rates restrictive for too long with the economy already slowing, it risks pushing inflation below its 2% target.

With growth under pressure now, it seems that the door is open for the ECB to move faster, pointed out the bank. While it doesn't seem like a done deal, it does bring the October meeting into play for a possible step up in easing.