Euro Area Inflation Accelerates


Consumer prices in the 16-nation euro region rose 0.9 percent from a year earlier after increasing 0.5 percent in November. The December rate was the highest since February 2009.

Crude-oil prices have more than doubled since touching a 2009 low of $32.70 a barrel last January, pushing up inflation even as companies cut costs and eliminated jobs to shore up earnings. While the strengthening economy prompted the European Central Bank to pull back some emergency measures last month, President Jean-Claude Trichet said inflation will remain moderate” in 2010.

The ECB said last month that euro-area inflation may average about 1.3 percent in 2010 and around 1.4 percent in 2011. The Frankfurt-based central bank aims to keep annual gains in consumer prices just below 2 percent.

The euro region emerged from its worst recession in more than six decades in the third quarter after the ECB lowered borrowing costs to a record low of 1 percent and introduced unprecedented stimulus measures. Europe’s service and manufacturing industries grew at the fastest pace in more than two years last month and investor confidence rose in January.

ECB council member Ewald Nowotny has indicated that he sees no need to raise interest rates in the first half of 2010, saying that he doesn’t see any major threats for price stability in the near future.” There is no strong need” to shift policy in the absence of inflation risks, he said.

The statistics office is scheduled to release a breakdown of December inflation on Jan. 15.


TradingEconomics.com, Bloomberg
1/5/2010 9:53:05 AM