Energy costs fuel eurozone inflation

Energy costs fuel eurozone inflation
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Inflation in the eurozone accelerated in September. Energy costs, which were up 9.2 percent year-on-year, were the main factor.

Consumer prices in the 17 countries using the euro rose by 2.7 percent from September last year.

Inflation hit 3.0 percent in November last year, but has fallen steadily since then and stabilised at 2.4 percent in May, June and July; that was when the eurozone economy slowed sharply from the sovereign debt crisis.

However in August it rose again for the first time in 11 months from higher fuel and transport costs, reaching 2.6 percent.

The European Central Bank’s target is to keep inflation below but close to 2.0 percent

The good news for the ECB was that core prices -which excludes fuel and unprocessed food – has stayed low giving it leeway to cut interest rates soon.

“It seems highly likely that the ECB will take interest rates down from 0.75 percent to 0.50 percent in the fourth quarter,” said Howard Archer, economist at IHS Global Insight.

“While the ECB could act as soon as its October meeting next Thursday, we lean towards the view that they will probably hold off to November.”

The ECB kept its main interest rate unchanged at a record low of 0.75 percent at its meeting earlier this month, taking another policy-easing route by agreeing to launch a new and potentially unlimited bond-buying programme.

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