Tags: euro | zone | inflation | eurozone

Eurozone Inflation Holds at 3 Percent for Third Month

Wednesday, 30 Nov 2011 02:14 PM

Inflation in the 17-nation euro area remained stuck at 3 percent for the third consecutive month in November, according to a first estimate, but the European Central Bank is still expected to cut interest rates at a meeting next week.

The European Union's statistics office Eurostat said in a statement on Wednesday that consumer prices rose by 3.0 percent in November, the same rate as in September and October and in line with the average of forecast in a Reuters poll.

Many economists expect the ECB to cut rates soon to support the weakening European economy, as the region's debt crisis saps business confidence and raises the specter of another recession.

But stubbornly high inflation, above the Frankfurt-based central bank's target of close to but below 2 percent, may complicate the debate around the next interest rate move when the bank's board meets on Dec. 8.

Carsten Brzeski, economist at ING in Brussels, said the data was unlikely to sway the ECB from reducing borrowing costs.

"It's in line with what we heard last month from (ECB President Mario) Draghi, saying that inflation would come down over the course of 2012... It won't do anything to change the current crisis mode of the ECB and this is heading towards another cut next week," he said.

The ECB increased rates to 1.5 from 1.0 percent in two steps — in April and July — but pulled them down to 1.25 percent in November.
Economists polled by Reuters on Tuesday saw a 60 percent chance of the ECB cutting rates to 1.0 percent next week.

With the pan-European economy slowing sharply, and with some analysts expecting it to have entered recession in the last quarter of this year, prices are expected to be capped and could fall rapidly, pulling inflation down.

In a separate release, Eurostat said the jobless rate in the eurozone inched up to 10.3 percent from 10.2 percent in September.

"High unemployment and inflation together are clearly putting strong downward pressure on spending power, particularly when taken together with fiscal austerity," said Jennifer McKeown, at Capital Economics.

"This should at least convince the ECB that further policy support is warranted. We see the bank cutting interest rates next week and perhaps hinting at further unconventional measures to come," she said in a note to clients.

© 2017 Thomson/Reuters. All rights reserved.

   
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Inflation in the 17-nation euro area remained stuck at 3 percent for the third consecutive month in November, according to a first estimate, but the European Central Bank is still expected to cut interest rates at a meeting next week. The European Union's statistics...
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2011-14-30
Wednesday, 30 Nov 2011 02:14 PM
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