Eurozone final inflation inline with provisional estimates, hits two-year high in September

Data released by Eurostat, the statistical office of the European Union earlier on Monday showed that Euroarea annual inflation was 0.4 percent in September 2016, inline with provisional estimates and up from 0.2 percent in August. Today's data marks the fastest set of rising prices since the oil price slide began in July 2014.

Core inflation, which strips out the volatile swings in the prices of food and fuel has failed to break through the one percent barrier. It came in at 0.8 percent in the year to September, the same level in August.

Details of the report showed that higher prices in restaurants and cafes as well as rents and cigarette prices offset drag from cheap fuel and gas prices, pushing up euro zone inflation in September. Food, alcohol and tobacco prices rose 0.7 percent y/y in September. Energy prices, despite rising 1.0 percent from August, were still 3.0 percent lower than a year earlier.

Inflation in Germany hit a 16-month high of 0.5 percent in September, while both Spain and Italy exited deflation. In the larger European Union, annual inflation was also 0.4 percent in September 2016, up from 0.3 percent in August and compared to -0.1 percent a year earlier.

The ECB meets on Thursday for its next monetary policy decision. Draghi will likely take comfort from the fact that his policies appear to be gradually working, with inflation creeping up from negative levels experienced at the beginning of 2015 and 2016.