Euro-area inflation slowed for a second month in September, led by falling energy prices, and remained below the European Central Bank’s 2 percent ceiling for an eighth month.
Consumer prices rose an annual 1.1 percent after a 1.3 percent increase in August, the European Union’s statistics office in Luxembourg said in a preliminary estimate today. The median forecast in a Bloomberg News survey of 34 economists was for 1.2 percent growth. The core inflation rate, which excludes volatile food and energy costs, was 1 percent.
The ECB forecasts that inflation will average 1.5 percent this year and 1.3 percent in 2014. ECB President Mario Draghi reaffirmed his pledge last week to keep key interest rates low for an extended period of time “based on a subdued outlook for inflation” and “broad-based weakness” in the economy. The central bank is forecast to hold its benchmark rate at a record low 0.5 percent on Oct. 2, a separate Bloomberg survey shows.
“It does appear that the recovery in Europe is gradually establishing itself, but it’s still pretty fragile,” Howard Archer, chief European economist at IHS Global Insight in London, said before the data were published. “Inflation being low is helping consumers’ purchasing power, and it means that the ECB does have scope for further action if it considers it necessary.”
Energy prices in the euro area fell 0.9 percent after a 0.3 percent decline in August, today’s report showed. The cost of food, alcohol and tobacco increased 2.6 percent after a 3.2 percent gain a month earlier.
Inflation in Germany, Europe’s largest economy, was unchanged at 1.6 percent in September, data on Sept. 27 showed. The Bundesbank said last week that slowing inflation is helping to support an “extraordinarily good” consumer climate in Germany.
Euro-area economic confidence increased more than economists forecast this month to the most in two years. An index of services rose to the highest since June 2011, signaling a strengthening recovery.
Economists in a Bloomberg survey published this month forecast euro-area economic growth of 0.2 percent this quarter and next after 0.3 percent expansion in the three months through June.
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