Greek Inflation Slows for Second Straight Month

Greece’s inflation rate fell for a second month in November even as it remained the highest in the euro region amid tax increases aimed at cutting the budget gap.

Consumer prices calculated using European Union methods rose 4.8 percent from a year earlier, compared with a 5.2 percent increase in October, the Hellenic Statistical Authority said in an e-mailed statement from Athens today. The inflation rate based on Greek methodology was 4.9 percent.

The inflation rate accelerated to a 13-year high of 5.7 percent in September after the government raised taxes to cut a soaring budget deficit. Prime Minister George Papandreou has increased the sales tax and excise duty on alcohol and cigarettes to curb the shortfall and continue receiving payments under a 110 billion-euro ($145.5 billion) EU-led bailout.

Last month, the government announced additional measures to reduce the budget gap, including an increase in the sales tax to 13 percent from 11 percent in 2011. The government expects that inflation will average 4.6 percent this year before slowing to 2.2 percent in 2011.

“We were expecting a very big decline in the rate of inflation from the start of next year,” Nicholas Magginas, an economist at National Bank of Greece SA, said by phone before today’s report. “But thanks to the new tax hikes this will be significantly weaker than we thought. We are even likely to have a small rise.”

For Related News and Information: Economic indicator watch: {ECOW EU} Top stories from Greece: {TOP GR} News on the Greek economy: {NI GRECO}

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net.

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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