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November 29, 2014

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Eurozone November CPI falls to 0.3%

A fall in energy costs due to dramatic drops in oil markets has pushed inflation across the 18-country eurozone down to 0.3 percent in the year to November, official data showed yesterday.

Preliminary numbers from the European Union’s statistics agency Eurostat showed the dip in the consumer price inflation rate from the previous month’s 0.4 percent was largely due to a 2.5 percent fall in energy costs. Excluding volatile energy, food, alcohol and tobacco prices — a gauge policymakers at the European Central Bank monitor closely — inflation was steady at 0.7 percent. November’s fall in the headline rate takes inflation further away from the ECB’s target of just below 2 percent. It’s likely to keep pressure on policymakers to launch in the coming months a bigger monetary stimulus program similar to the one the Federal Reserve recently brought to an end.

In gauging the strength of the economy and inflation, the ECB has a number of issues to assess, not least the sharp fall in oil markets in recent months. Energy prices have taken a battering due to a recovery in production from Iraq and Libya, the increase in shale gas output in the US, as well as a slowdown in many economies, notably Europe.

“The risks around our already-anaemic inflation profile lie very firmly to the downside,” said James Ashley, chief economist at RBC Capital Markets.




 

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