RTTN:Eurozone Inflation Rises Unexpectedly On Fuel Cost
(RTTNews) - Rising energy prices pushed Eurozone inflation unexpectedly higher in September, weighing on expectations for an interest rate cut.
Inflation increased to a six-month high of 2.7 percent from 2.6 percent in August, the flash estimate from Eurostat showed Friday. The rate was forecast to slow to 2.4 percent. The final data for September is due on October 16.
The European Central Bank aims to retain inflation rates below, but close to 2 percent over the medium term. Data showed that inflation is moving away from the target, while the economy is heading into a recession.
However, IHS Global Insight's economist Howard Archer said the underlying inflationary environment is far from alarming. If the European Central Bank does hold fire next Thursday, then another month of poor Eurozone economic data and surveys will encourage the bank to act in November, he said.
Among the main components of inflation, energy prices gained 9.2 percent compared with 8.9 percent in August. Likewise, the cost of services climbed 2 percent, up from 1.8 percent a month ago.
Meanwhile, the increase in prices of food, alcohol and tobacco prices slowed to 2.9 percent from 3 percent. Non-energy industrial goods prices grew 0.8 percent after logging 1.1 percent rise.
Spain's EU harmonized inflation rose to 3.5 percent in September driven by an increase in the value added tax, the statistical office INE said today. Similarly, Italy's HICP inflation rose to 3.4 percent from 3.3 percent, the country's statistical agency ISTAT reported. Meanwhile, German inflation slowed to 2.1 percent from 2.2 percent.
The ECB has kept the refi rate at 0.75 percent since July when it took the rate below 1 percent for the first time in the ECB's history. Although the ECB is seen holding key rate next week, the bank will probably reduce rates before the end of this year.
