Eurozone annual inflation stable this December but lingering below ECB expectations

Newsroom 05/01/2016 | 15:31

Annual inflation for the euro area is expected to be 0.2 percent in December 2015, stable compared to November 2015 but below the just under 2 percent level of inflation targeted by the European Central Bank (ECB), according to data from Eurostat, the statistical office of the European Union.

Of the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in December (1.2 percent, compared with 1.5 percent in November), followed by services (1.1 percent, compared with 1.2 percent in November), non-energy industrial goods (0.5 percent, stable compared with November) and energy (-5.9 percent, compared with -7.3 percent in November), says Eurostat.

The expectation among policy makers and economists was that the annual rate of inflation would pick up from late 2015, “but with oil prices once again on the slide as 2015 drew to a close, those hopes have been dashed for now, making it possible that the ECB will again add to its stimulus measures this year”, reports the Wall Street Journal.

For almost three years now, inflation in the Eurozone has undershot the ECB’s target and despite “radical policy steps including EUR 1.5 trillion of asset purchases, it will take years at best to push price growth back toward 2 percent, threatening the bank’s credibility”, says Reuters.

By holding steady at 0.2 percent, the headline inflation, targeted by the ECB, missed expectations for a rise to 0.3 percent and fell short of the bank’s target, according to information from Eurostat. “The numbers we got today are a tentative indication that inflation may not pick up as the ECB had forecast a month ago,” said Kenneth Broux, head of corporate research, FX and rates at Societe Generale, to Reuters.

As far as Romania is concerned, statistics from the National Bank (BNR) suggest an expected inflation rate of -0.7 percent, compared to the target rate of 2.5 percent, in the last quarter of 2015. BNR projections for 2016 have the inflation rate remaining negative at -0.3 percent throughout the first quarter of 2016 with a change to take place in the second quarter so that by the end of this year the inflation rate should reach 1.1 percent. This would be in accordance with estimates made by ING in November 2015 but still below the 2.5 percent target set by BNR.

 Andreea Tint

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