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Eurozone inflation eases as oil prices slump

LONDON (AP) — The recent fall in oil prices has pushed down inflation across the 19-country eurozone, official figures showed Friday in a development that makes it even less likely that the European Central Bank will start raising interest rates anytime soon.

Eurostat, the European Union’s statistics office, says consumer prices rose 2 percent in the year to November, down from 2.2 percent the previous month.

The main reason behind the fall appears to be a waning boost from energy prices. On an annual basis, they were up 9.1 percent against 10.7 percent. On Thursday, U.S. crude briefly fell below $50 a barrel for the first time this year. Just a couple months ago, it was trading at four-year highs around $75 a barrel.

Despite the fall, headline inflation remains more or less where the European Central Bank would like it — its policy aim is just below 2 percent.

But stripping out volatile items like energy, inflation is much weaker and that’s likely to concern the ECB. The so-called core rate fell to 1 percent from 1.1 percent, which suggests that wages increases are not strong enough to push up prices on a broad basis.

Despite the declines, the ECB is still expected on Dec. 13 to end its monetary stimulus program, under which it has since 2015 bought government bonds in the markets to keep interest rates low. It has indicated it could start raising interest rates again next year, though not before the autumn at the earliest. The ECB has kept its main interest rate at zero for years and has a negative rate on deposits that commercial banks hold at the central bank.

“Softer headline inflation for the beginning of 2019 is largely expected, but the degree to which inflation will drop will be key for the ECB to determine when to hike,” said Bert Colijn, a senior economist at ING.

“For now, the ECB maintains its forward guidance of a rate hike after the summer of next year, but if economic conditions continue to show sluggishness, the question is if that will be maintained.”

The cooling eurozone economy was reflected in separate figures showing a modest 12,000 rise in unemployment in October to 13.17 million. Though that wasn’t enough to raise the unemployment rate from the decade-low of 8.1 percent, it suggests that the consistent improvements of the past few years may be fading.

Copyright © 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, written or redistributed.



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