Eurostat: Euro Area Inflation Held at 3.1 Percent in December.
Inflation in the countries that share the euro currency was expected to hold at a year-on-year rate of 3.1 percent in December, its highest-ever level for a second straight month, the EU statistics agency Eurostat said Friday.
Eurostat's figure is a first estimate that the agency will confirm on Jan. 16 when it reveals more details about the factors pushing up prices and give a breakdown of the figures. Thirteen European Union nations shared the euro in December. Malta and Cyprus joined the euro zone on Jan. 1, bringing to 15 the number of countries using the currency that has increasing clout over the slumping U.S. dollar.
Inflation in the euro zone has spiked in recent months, led by elevated prices for oil and food. It is now well over a guideline of just under 2 percent that the European Central Bank looks to when it decides whether to raise interest rates to boost borrowing costs. Year-on-year inflation in the currency area was 2.6 percent in October and 2.1 percent in September. It last hit 3.1 percent in May 2001, months before the euro came into circulation.
Though the December level is well above the ECB's target, the figure is not likely to cause the bank to adjust its benchmark interest rate from 4 percent when it meets next Thursday, said Aurelio Maccario, co-head of European economics at UniCredit Markets & Investment Banking in Milan.
"With inflation more than one full percentage point above the central bank's definition of price stability, it's hard to imagine the prevailing hawkish party within the (governing council) willing to concede anything in terms of policy relaxation," he said in a note to investors. "We stick to our idea that rates will remain at 4 percent for the foreseeable future with a slight tightening bias left in place."
Similarly, Matthias Rubisch, an analyst at Commerzbank in Frankfurt, said the new figure means that "the ECB will no doubt continue to talk of raising interest rates, but we do not actually expect it doing so." The ECB has left its rate untouched at 4 percent since June.
Inflation in the countries that share the euro currency was expected to hold at a year-on-year rate of 3.1 percent in December, its highest-ever level for a second straight month, the EU statistics agency Eurostat said Friday.
Eurostat's figure is a first estimate that the agency will confirm on Jan. 16 when it reveals more details about the factors pushing up prices and give a breakdown of the figures. Thirteen European Union nations shared the euro in December. Malta and Cyprus joined the euro zone on Jan. 1, bringing to 15 the number of countries using the currency that has increasing clout over the slumping U.S. dollar.
Inflation in the euro zone has spiked in recent months, led by elevated prices for oil and food. It is now well over a guideline of just under 2 percent that the European Central Bank looks to when it decides whether to raise interest rates to boost borrowing costs. Year-on-year inflation in the currency area was 2.6 percent in October and 2.1 percent in September. It last hit 3.1 percent in May 2001, months before the euro came into circulation.
Though the December level is well above the ECB's target, the figure is not likely to cause the bank to adjust its benchmark interest rate from 4 percent when it meets next Thursday, said Aurelio Maccario, co-head of European economics at UniCredit Markets & Investment Banking in Milan.
"With inflation more than one full percentage point above the central bank's definition of price stability, it's hard to imagine the prevailing hawkish party within the (governing council) willing to concede anything in terms of policy relaxation," he said in a note to investors. "We stick to our idea that rates will remain at 4 percent for the foreseeable future with a slight tightening bias left in place."
Similarly, Matthias Rubisch, an analyst at Commerzbank in Frankfurt, said the new figure means that "the ECB will no doubt continue to talk of raising interest rates, but we do not actually expect it doing so." The ECB has left its rate untouched at 4 percent since June.
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