Euro-Area Inflation Accelerates Before Key ECB Decision on QE

  • Consumer prices rise 0.6%, core inflation unchanged at 0.8%
  • ECB to discuss on Dec. 8 whether to extend asset purchases

Schulz: ECB Tapering Is Europe's Next Big Question

Euro-area inflation accelerated in November, continuing its slow improvement before a crucial European Central Bank meeting next week.

Consumer prices rose 0.6 percent from a year earlier, following a 0.5 percent increase in October, the European Union’s statistics office in Luxembourg said on Wednesday. Core inflation was unchanged at 0.8 percent in November. Both readings match the median estimate on Bloomberg surveys of economists.

The ECB’s Governing Council wants to see a sustained pickup in inflation and will discuss on Dec. 8 whether it needs to extend a 1.7 trillion-euro ($1.8 trillion) quantitative-easing program past its provisional end date of March. While President Mario Draghi and other policy makers have ruled out a sudden stop to purchases, they’ve refused to provide any details, fueling uncertainty about the size of monetary stimulus in 2017.

“You have headline inflation on the rise almost exclusively due to energy while core inflation remains very stable,” Marco Valli, chief euro-area economist at UniCredit SpA in Milan, said before the publication of the data. “This strongly suggests the ECB will have to extend QE at the current pace in December because at the end of the day the sustainability of the improvement toward the inflation target is approximated more by the core inflation rate.”

Governing Council member Yannis Stournaras, the head of Greece’s central bank, said in an interview on Friday that the ECB might consider reducing the amount of monthly asset purchases to stretch out stimulus, as the institution positions itself as a “pillar of stability” amid political uncertainty.

The bond-buying program is “sufficiently flexible” and could be “revisited to preserve the substantial degree of monetary accommodation necessary” to meet the central bank’s inflation objective, Draghi told European Parliament lawmakers on Monday.

German inflation unexpectedly failed to accelerate in this month, while price growth in Spain remained at 0.5 percent.

Regional inflation data come one day after a European Commission survey showed economic confidence in the euro area inched up in November. Eurostat will report on Thursday that unemployment remained unchanged at 10 percent in October, according to a separate Bloomberg survey.

— With assistance by Andre Tartar, and Kristian Siedenburg

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