Euro Inflation Slows Enough for the ECB To Breathe
Consumer prices may have peaked, reducing the need to tighten monetary policy.
Whose round is it?
Photographer: Win McNamee/Getty Images
Whisper it, but inflation may have peaked in the euro zone. Consumer prices increased by an annual 10% in November, down from 10.6% the previous month, but just as importantly the monthly number was negative at -0.1%. Cementing the good news was the core measure excluding energy and food prices coming in at an unchanged 5%. This opens the door for the European Central bank to raise its official deposit rate by only half a percentage point to 2% on Dec. 15, rather than subjugating the struggling euro economy to a third consecutive 75 basis-point hike.
Still, there will be plenty of unhappy interest-rate hawks on the ECB's governing council flapping for a while yet, eschewing one month's data as inadequate evidence that inflation has been tamed. Volatile headline numbers aside, the key determinant of next year’s ECB actions lies in how much core inflation recedes, and how quickly.