ZCZC
BCN-18
EU-ECONOMY-INFLATION
Eurozone inflation slows in December: Eurostat
BRUSSELS, Jan 4, 2019 (BSS/AFP) – Eurozone inflation slowed to an annual rate
of 1.6 percent in December mainly due to lower energy costs, preliminary data
from the EU statistics unit Eurostat showed Friday.
Falling oil prices helped limit increases in the costs consumers pay for
energy of all kinds to an average of 5.5 percent, down from a 9.1 percent in
November.
Overall inflation in the 19-member zone was 1.9 percent in November, and
analysts polled by Factset had expected only a slight dip to 1.8 percent last
month.
Economist Nicola Nobile at Oxford Economics felt the data “clearly bodes
well for consumer spending, which we see accelerating this year.”
But European Central Bank monetary policy is aimed at keeping inflation
just below but close to 2.0 percent, and the latest reading left the ECB “in
an awkward spot with regards to their first rate hike,” ING economist Bert
Colijn noted.
Core eurozone inflation, which strips out volatile items including energy,
food, alcohol and tobacco, was stable in December at 1.0 percent, the
Eurostat data showed.
The ECB has held its reference interest rate at zero since March 2016, and
analysts have been looking for signs as to whether it might begin to raise
the cost of borrowing later this year.
“But with inflation moving away from the target and an economy that is
slowing, the question is whether the ECB will see a chance to hike at all,”
Colijn said.
Bank board member Benoit Coeure told France Inter radio Friday that its
rates “are going to remain low for a long time still”.
Referring to global risks, including that of a trade war between China and
the US, Coeure added: “The machine to make crises is still there, there will
be new financial crises and we have not done all we could in terms of
financial regulation.”
He pointed in particular to parallel financial networks known as “shadow
banking” but added that even among high-street banks, “with the financial
crisis in the past, bad habits are coming back.”
ING economist Bolijn concluded that the ECB “is set for a year of
uncertainty.”
BSS/AFP/SR/1745 HRS