Expectations for another quarter-point rate cut by the European Central Bank are on the rise due to growing evidence of a significant slowdown in both inflation and economic activity.

Euro-area inflation slowed below the European Central Bank’s 2% target for the first time since 2021 — backing investor bets that interest rates may be lowered more quickly than previously anticipated.

Inflation in the 20 European Union countries that use the euro slowed by 0.4% to 1.8% in September as an energy prices plunge that began in August gathered pace, according to official figures published Tuesday.

Inflation in the 20 countries that use the euro fell to 1.8% in September, below the European Central Bank’s target of 2% for the first time in more than three years

The European Central Bank is increasingly confident that inflation will fall to its 2% target and this will be reflected in its next policy move, the bank's president said on Monday, dropping the clearest hint yet about a coming interest rate cut.