Inflation, calculated using a harmonized European Union method, eased to 2.8 percent from 2.9 percent in October, the Federal Statistics Office in Wiesbaden said today. Economists expected a drop to 2.7 percent, according to the median of 20 forecasts in a Bloomberg News survey. Prices were unchanged in the month.
Europe’s worsening debt crisis is threatening to tip the 17-member euro region into recession, prompting the European Central Bank to cut interest rates this month after increasing them twice earlier in the year. Germany’s economy may grind to a near halt in 2012 with growth of between 0.5 percent and 1 percent, the Bundesbank said last week.
“The inflation rate will be clearly below 2 percent in the first quarter,” said Stefan Muetze, and economist at Helaba in Frankfurt. “The ECB has room to lower interest rates further,” even though inflation in the euro region isn’t slowing rapidly, he said.
Euro-area inflation may hold at 3 percent in November, another survey of economists shows. That report is due from the European Union’s statistics office in Luxembourg on Nov. 30. The ECB aims to keep the inflation rate just below 2 percent.
On Nov. 25, Italy had to pay almost 7 percent to sell six- month bills at an auction, fanning investor concern that the world’s fourth-biggest borrower may struggle to finance its debt. The euro fell to a seven-week low. ECB Executive Board member Jose Manuel Gonzalez-Paramo on Nov. 24 urged politicians to take “bold” steps toward fiscal union to stem the crisis.
At the same time, German business confidence unexpectedly rose for the first time in five months in November, defying concerns the country is heading for recession. Unemployment is at a two-decade low, supporting consumer spending.
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