Eurozone inflation slipped further below the European Central Bank’s (ECB) target, according to preliminary data for December published by Eurostat on Tuesday. Specifically, the consumer price index (CPI) for the region registered an increase of 0.8%, decreasing slightly from November’s 0.9% rise (consensus: 0.9%). The ECB, that is not expected to make changes to its monetary policy on Thursday, holds 2% as its target rate for inflation. The core inflation rate, as per the ECB´s definition [which excludes food, energy, alcohol and tobacco prices] slowed down to a 0.7% year-on-year pace, comfortably below the 0.9% expected by economists and the previous month´s 1.0% clip. Commenting on today´s numbers economists at Capital Economics had this to say: ‘[...] the latest prices data support the view that CPI inflation is likely to remain significantly below the ECB’s 2% price stability ceiling for rather longer than the central bank expects. While the ECB may refrain from providing additional policy support on Thursday, we expect further action in the months ahead.’ In a separate report out on Tuesday Eurostat revealed that producer prices in the single currency area dropped by 1.2% over the year in November, versus the 1.3% fall seen in October. Excluding construction and energy prices were off by 0.3% over that same time period, just as in October. In quarter three of 2013 euro area gross domestic product (GDP) contracted at a 0.4% pace year-on-year pace, although it did manage to grow by a tenth of a percentage point in terms of quarterly rates of change, thus expanding for a second consecutive quarter.

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