Eurozone inflation climbs to highest since April 2014

Posted on November 30, 2016

A welcome dose of good news before next week’s big European Central Bank meeting.

Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of last year’s energy price falls.

This month’s figures have however been dampened by core inflation – which strips out volatile elements such as energy prices and food – remaining stuck at 0.8 per cent for the fourth consecutive month. The figures are a first flash estimate from Eurostat.

Core inflation is closely watched by policymakers at the ECB who have been battling with persistently low inflation for over two years. Faced with weak price pressures, the central bank is widely expected to extend its landmark €80bn a month bond-purchase at the ECB’s December policy decision next Thursday. (More on that here.)

ECB president Mario Draghi said today he expects inflation to reach its target of below but near 2 per cent by around 2018-2019.

“We’re still years away from a return to normal”, said Peter Vanden Houte, chief eurozone economist at ING, who says low inflation has likely bottomed out this year.

Eurostat said energy prices fell 1.1 per cent this month, compared to November 2015, while food, alcohol and tobacco prices climbed 0.7 per cent and industrial goods prices inched up by 0.3 per cent.

The eurozone-wide figures follow on from a flash estimate of German inflation, which remained unchanged at 0.7 per cent this month, matched by France.

Chart courtesy of Bloomberg

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