Euro region inflation slows
Consumer prices climbed 2.1% from a year ago, down from 2.2% in November, the Luxembourg-based European statistics office said in a preliminary estimate. The rate matched the median forecast of 13 economists surveyed by Bloomberg News.
Christophe Dehondt, who helps manage a $423 million fund of inflation-linked bonds at CPR Asset Management in Paris said: “We haven’t felt the rise in oil prices in Europe thanks to the euro’s appreciation. This will give some room to manoeuvre for the European Central Bank.”
Yesterday’s report suggests the ECB will have more leeway to keep borrowing costs at the lowest level in more than half a century as the region recovers from the slowest economic growth in a decade.
The ECB meets to set rates for the first time this year on Thursday.
Inflation has held above the ECB’s 2% limit since August as a heatwave boosted fresh food prices and the price of Brent crude oil reached a seven-month high in October.
Yesterdays’ inflation estimate is based on energy prices, as well as inflation figures reported in recent days and weeks by German, Italian and Belgian governments. A detailed breakdown will be published on January 21.
In Germany, Europe’s largest economy, inflation fell to 1% in December from 1.3% in November amid cheaper prices for heating oil, clothes and shoes, and durable goods such as washing machines.
In Italy, which accounts for about a fifth of the euro economy, the rate fell to a 10-month low of 2.6% as a drop in communication costs offset an increase in food, tobacco and alcohol prices.
Belgian inflation slowed to 1.74% from 1.86% in November.
So far, there is little indication that consumer spending is gaining strength.
The euro’s increase has raised concern among business lobbies, such as France’s Medef that the stronger currency, which is hurting profit of companies such as carmaker PSA Peugeot Citroen, may stifle Europe’s export-led recovery.
