Euro-Zone Inflation Hits Two-Year High


Consumer prices in the 16 countries that use the euro rose at the fastest rate in almost two years during October, the European Union's official statistics agency Eurostat confirmed on November 16.

Eurostat Friday said consumer prices rose by 0.4% from September, and were up 1.9% from October 2009. The year-to-year increase was in line with Eurostat's first estimate, which was published at the end of September. The annual rate of inflation is the highest since November 2008.

Although it remains in line with the European Central Bank's target, the inflation rate has picked up steadily in recent months. And in October the core rate of inflation—which excludes volatile prices such as those for food and energy—picked up to 1.1% from 1%.

However, economic growth was modest in the third quarter, and is unlikely to pick up significantly in the months ahead, so the ECB won't be raising its key interest rate any time soon.

The ECB would like to withdraw some of the extraordinary support it has provided to the banking system in the wake of the financial crisis and the recession that followed. It's main difficulty in doing that was highlighted in the inflation data. Ireland, whose banks most need ECB support, is in deflation, with consumer prices having fallen by 0.8% from October 2009.

In the euro zone as a whole, the inflation rate was pushed higher by energy prices, which rose 0.6% from September.


TradingEconomics.com, WSJ
11/17/2010 3:37:20 AM