Euro inflation hits 3%; rate cut off?
Source: Agencies |
October 1, 2011, Saturday
|
Print Edition
Print Edition
INFLATION jumped to a startling 3 percent in September in the 17 countries that use the euro, a surprise increase that makes it less likely the European Central Bank will cut interest rates next week to head off a possible recession.
The rate reported yesterday from the European Union's statistics agency was the highest since October 2008 and represented a big increase from August's 2.5 percent.
The ECB, the chief monetary authority for the euro countries, has come under pressure to cut interest rates soon to ward off mounting signs of recession in the eurozone economy, which is slowing amid a waning global recovery and ongoing concerns surrounding Europe's debt crisis.
Leading economic indicators have been falling to the point where some predict a downturn is imminent, after weak 0.2 percent growth in the second quarter. Eurozone officials said they fear that financial turmoil from the crisis over too much government debt in some countries is beginning to weigh on the wider economy.
Separate figures yesterday from the statistics office showed unemployment in the eurozone stuck at 10 percent in August.
A few economists have predicted a cut next week when the ECB's rate-setting council meets in Berlin. But the council's 23 members may want to see evidence that inflation is not a threat before they cut. September's rate, which is well above the ECB's mandate to keep inflation just below 2 percent, could mean a cut that soon is less likely.
"The latest eurozone inflation and unemployment numbers would appear to reduce the chance of an imminent ECB rate cut," said Ben May, European economist at Capital Economics.
Ahead of the release, some economists had said a technical change in the way statistics are kept for seasonal goods could have an unexpectedly big impact on the headline inflation rate. Some economists expected little or no change while others had predicted a figure as high as 2.9 percent.
The statistics office did not provide details behind the increase. That will have to wait until the middle of next month when it publishes a more complete assessment.
The ECB has forecast inflation to fall to 1.7 percent on average next year.
The rate reported yesterday from the European Union's statistics agency was the highest since October 2008 and represented a big increase from August's 2.5 percent.
The ECB, the chief monetary authority for the euro countries, has come under pressure to cut interest rates soon to ward off mounting signs of recession in the eurozone economy, which is slowing amid a waning global recovery and ongoing concerns surrounding Europe's debt crisis.
Leading economic indicators have been falling to the point where some predict a downturn is imminent, after weak 0.2 percent growth in the second quarter. Eurozone officials said they fear that financial turmoil from the crisis over too much government debt in some countries is beginning to weigh on the wider economy.
Separate figures yesterday from the statistics office showed unemployment in the eurozone stuck at 10 percent in August.
A few economists have predicted a cut next week when the ECB's rate-setting council meets in Berlin. But the council's 23 members may want to see evidence that inflation is not a threat before they cut. September's rate, which is well above the ECB's mandate to keep inflation just below 2 percent, could mean a cut that soon is less likely.
"The latest eurozone inflation and unemployment numbers would appear to reduce the chance of an imminent ECB rate cut," said Ben May, European economist at Capital Economics.
Ahead of the release, some economists had said a technical change in the way statistics are kept for seasonal goods could have an unexpectedly big impact on the headline inflation rate. Some economists expected little or no change while others had predicted a figure as high as 2.9 percent.
The statistics office did not provide details behind the increase. That will have to wait until the middle of next month when it publishes a more complete assessment.
The ECB has forecast inflation to fall to 1.7 percent on average next year.
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