European Inflation Slows


Europe's inflation rate declined to the lowest since January as the European Central Bank prepares to cut interest rates for the second time in less than a month in response to the financial and economic crisis.

Inflation in the euro area eased to 3.2 percent in October from 3.6 percent in September, the European Union statistics office in Luxembourg said today. That matched the median of 27 economists in a Bloomberg News survey. A separate report showed unemployment stayed at 7.5 percent in September, the highest in more than a year.

The ECB unexpectedly cut its key rate by half a percentage point to 3.75 percent on Oct. 8 as part of a coordinated global action. ECB President Jean-Claude Trichet said Oct. 27 the bank may follow that emergency cut with another reduction at its Nov. 6 meeting and fellow policy maker Miguel Angel Fernandez Ordonez said the sharp drop in inflation is ``very important.''

The figures released today are an estimate. The statistics office will publish a detailed breakdown of the data, including key food- and energy-price inflation, as well as the core rate, on Nov. 14. Crude-oil prices have dropped by 57 percent from their all-time high in the last four months, cutting the cost of gasoline and heating oil. From a year earlier, oil is down 32 percent to around $64 a barrel.

Recent data show that Europe's manufacturing and services industries contracted at a record pace in October, while executive and consumer confidence plunged to the lowest in 15 years. The interest-rate cut this month was the ECB's first since June 2003 and it followed an increase of one-quarter percentage point in July.


TradingEconomics.com, Bloomberg.com
10/31/2008 8:23:14 AM