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December 17, 2009

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Home » Business » Economy

Euro prices rise but not as much as expected

CONSUMER prices in the 16 countries that use the euro rose by a lower than previously predicted 0.5 percent in the year to November, official figures showed yesterday.

Analysts had been expecting Eurostat - the EU's statistics office - to confirm its preliminary estimate of 0.6 percent.

Even though it was lower than expected, November's inflation figure was the first positive rate since the spring. From May, when annual inflation was flat, prices have fallen - by as much as 0.7 percent in July - as deflationary pressures dominated during Europe's worst recession since World War II.

A slump in energy prices from last year's peaks was also to blame - since July 2008, a barrel of oil collapsed from its all-time high of nearly US$150 to around US$30 earlier this year.

Further increases are expected in the months ahead as output starts to increase, albeit modestly, and last year's sharp falls in energy costs drop out of the annual comparison.

However, very few economists reckon that inflation will rise too high, suggesting that the European Central Bank can keep its main interest rate at the historic low of 1 percent for a while yet even as it starts to withdraw some of the extraordinary liquidity measures it has introduced over the past couple of years.


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