Euro-zone inflation: Falling again

Posted: January 7, 2014 in economy
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TODAY’S inflation figures will worry the European Central Bank (ECB), whose governing council is due to meet on January 9th. According to Eurostat’s preliminary estimate, inflation has fallen from 0.9% in the year to November to 0.8% in December. A particular concern is that core inflation, which strips out energy, food, alcohol and tobacco from the all-items index, has fallen from 0.9% to 0.7%.Both measures are uncomfortably lower than the ECB’s target for inflation, of below but close to 2%. Overall inflation is still a bit higher than its recent low of 0.7% in October. But core inflation is now at a record low for the euro zone since it came into being 15 years ago, on records based on the changing composition of the zone (which started with 11 members); and it matches the previous record low in February 2010, on figures based on the 17-strong membership of last year (Latvia joined on January 1st, expanding the currency club to 18).The downward move in core inflation is likely to be especially disconcerting for the ECB. Its forecast last month envisaged headline inflation averaging 1.1% this year, down from 1.4% in 2013. But it also predicted core inflation (on a measure excluding energy and food but not alcohol and tobacco) of 1.3% this year, up from 1.1% in 2013.The ECB’s council is unlikely to ease monetary policy again this Thursday, following its cut in interest …

via Economic Crisis


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