The rate of Inflation edged up slightly in October across the euro zone that comprises 18 member countries, strengthening the outlook that the European Central Bank (ECB) will hold fire on any further policy action at its meeting scheduled for next week.
A first estimate released on Friday from the European Union’s (EU) statistics office suggested that the consumer prices in the European nations increased by 0.4 percent last month in accordance with the market expectations.
The German data, which came a day earlier, showed inflation in the largest European economy moving at slow pace in October to 0.7 percent, which is its lowest reading since May.
According to ABN AMRO macro research head Nick Kounis, several factors intended action by ECB as early as next week was doubtful. However, he expected the arrival of the measures by the first quarter of 2015.
“We still think that the central bank is likely to further step up its monetary easing. If you get any kind of economic shock with inflation this low, there is a risk, albeit a small risk, of deflation,” Kounis said.
Meanwhile, the policymakers at the European Central Bank still appeared divided on the possibility of deflation in the eurozone.
ECB’s chief economist Peter Praet earlier this week said that the likelihood was limited, but Governing Council Member Ignazio Visco on Friday said that the policymakers required to remain cautious.
According to the statistics office, the prices increased at fastest pace for services, up 1.2 percent, followed by a 0.5 percent rise in alcohol, food and tobacco costs.
On the other hand, the prices of unprocessed food prices declined 0.1 percent year-on-year last month. Energy prices were 1.8 percent cheaper.
Apart from the energy and unprocessed food, prices increased 0.8 percent last month, a stable rate from September. The number is described as core inflation by the ECB.
Meanwhile, the European currency euro initially emerged stronger against the US dollar and the pound after the release of the data but quickly surrendered these gains and remained below levels witnessed at the start of the trading session.
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