Eurozone Inflation Stays Low

Eurozone Inflation Stays Low

BRUSSELS (AP) -- Inflation across the 19-country eurozone remained at a low annual rate of 0.1 percent in November, official figures showed Wednesday, in a development that strengthens the case for the European Central Bank to deliver a further big stimulus for the region this week.

The inflation rate reported by the European Union's statistics agency was below market expectations for a modest uptick to 0.2 percent. Because the ECB targets a rate of just below 2 percent, the bank is expected to announce another stimulus for the eurozone at the conclusion of its policy meeting Thursday.

Most economists expect the ECB to make it more expensive for commercial banks to park their cash at the central bank and to extend its current government bond-buying program. The aim of both measures is to stoke economic activity in the region to help get inflation back towards the target.

The euro fell in reaction to the inflation figures, from about $1.0620 to $1.0584.

Inflation in the eurozone, as well as many parts of the world, has been low — sometimes even negative — for more than a year, largely because oil and commodity prices have fallen sharply in financial markets.

Among many knock-on effects, that's led to lower domestic energy bills, falling prices at the pump and subdued costs for businesses. Weak economic growth in large parts of the eurozone has also failed to push up wages, which is one tried-and-trusted way of generating inflation.

Perhaps more concerning for policymakers at the ECB than the unchanged headline rate is that the core rate, which strips out volatile items such as energy, food, alcohol and tobacco, fell to 0.9 percent from 1.1 percent. The consensus in the markets was the rate to remain unchanged.

The low core rate indicates that inflation pressures across the economy remain benign.

(KA)