Euro zone inflation rate to fall sharply in Oct

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Euro zone inflation rate to fall sharply in Oct
Oluşturulma Tarihi: Kasım 05, 2008 16:55

Inflation in the euro zone is expected to have dropped further in October based on a retreat in oil and food prices, providing welcoming news to the European Central Bank ahead of an expected interest rate cut next week.

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A Reuters poll of 40 economists showed expectations for inflation to fall to 3.2 percent in October from September's 3.6 percent. That would be a far cry from a record high of 4.0 percent seen in July, although still well above the central bank's two percent target ceiling.

"This has come about mainly as a result of the steep decline in crude oil and other energy prices in the past three months. In addition, food price pressures appear to be abating," said analysts at Merrill Lynch in a research note.

Oil prices have plummeted from record highs of almost $150 a barrel to around $65.

Forecasts ranged from 2.9 to 3.5 percent and the predictions for a drop will have been enforced by regional figures.

Data from Germany on Wednesday showed inflation in the 15-nation bloc's largest economy slowed to 2.4 percent this month from 2.9 percent in September.

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Spanish official figures earlier on Thursday showed inflation had slumped to 3.6 percent from 4.6 percent the previous month.

The ECB joined other major central banks on Oct. 8 in slashing 50 basis points from interest rates, and is expected to cut a further 50 points next week, as it tries to boost an economy that is very likely already in recession.

"The way prices are going at the moment is hardly an obstacle to the ECB responding to the recession in the euro area with generous rate cuts," said Ralph Solveen at Commerzbank.

The central bank has said it expects inflation to ease in the coming months and a Reuters poll showed economists see it at 2.2 percent in 2009.

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