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Euro-Area Inflation Slowed in August on Falling Energy Prices

Euro-area inflation decelerated in August, led by a drop in energy prices.

Annual consumer-price growth slowed to 1.3 percent from 1.6 percent in July, in line with an initial estimate on Aug. 30, the European Union’s statistics office in Luxembourg said today. In the month, prices rose 0.1 percent, while the annual core inflation rate, which excludes volatile costs such as energy, alcohol and tobacco, was 1.1 percent.

“The inflation outlook is very comfortable for everybody,” said Jens Kramer, an economist at NordLB in Hanover. “Our projection is that the inflation rate will remain in the 1.5 percent region, and that is something that is very important for the European Central Bank, which in our opinion will stick to the very expansive monetary policy.”

The euro-area economy emerged from a record-long recession in the second quarter amid the first sustained period of financial-market calm since the start of the debt crisis. Europe continues to struggle with the effects of the turmoil, including a jobless rate at a record 12.1 percent.

The ECB on Sept. 5 kept its benchmark interest rate at a record low 0.5 percent. ECB President Mario Draghi has said that the Frankfurt-based central bank will keep interest rates at the present level or lower for an “extended period” based on a “subdued” inflation outlook.

Energy costs dropped 0.3 percent, compared with an increase of 1.6 percent in July, according to today’s release. The cost of food, alcohol and tobacco rose 3.2 percent, compared with 3.5 percent in July, while the cost of services increased 1.4 percent.

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

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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