Eurozone inflation slowed further as expected in September because of falling prices of unprocessed food and energy, a first estimate by the EU’s statistics office showed yesterday.
Eurostat said consumer prices in the 18 countries sharing the euro rose 0.3%, year-on-year, slowing from 0.4% annualised increases in August and July.
The move was in line with market expectations, according to polling data. Unprocessed food prices fell 0.9%, year-on-year, in September and energy was down 2.4%.
What the European Central Bank calls core inflation — a measure stripping out these two volatile components — was 0.7% year-on-year, slowing down from 0.9% in August.
The ECB wants to keep headline inflation below, but close to, 2% over the medium term and the persistently low price growth underscores the bank’s difficulties in keeping inflation on target in a stagnating eurozone economy.
To accelerate price growth, the ECB cut the cost of borrowing to almost zero and pledged further cheap loans to banks and to buy repackaged debt.
ECB president Mario Draghi has emphasised that it could do even more. However, going for full-blown quantitative easing, by adding government bonds to the ECB’s shopping list, would be politically difficult.
Mr Draghi is expected to give further details of ECB plans to buy re-parcelled debt, known as asset-backed securities, when the bank’s governing council meets in Naples tomorrow.
Mr Draghi has, in the meantime, sought to put the ball back in the court of governments, saying that the central bank alone cannot single-handedly turn around the bloc’s economy and that countries need to make economic reforms.
The ECB’s job may be made easier by a weakening euro which has fallen below its 2013 lows and is down almost 9% against the dollar since May.