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Eurozone Inflation Falls in December

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Euro zone inflation slowed in December, the European Union’s statistics office confirmed on Thursday, in what the European Central Bank attributed last week to a one-off change in the method of calculating price growth in Germany.

Consumer prices in 17 countries sharing the euro last year rose 0.3 percent on the month, putting the annual inflation rate at 0.8 percent, down from 0.9 percent in November, but a tad above 0.7 percent in October.

The ECB, which wants to keep inflation below, but close to 2 percent over the medium term, expects a prolonged period of low inflation but sees no immediate risk of deflation.

“We were all aware that the decline in the inflation rate in December … first of all was expected, and it was caused by a technical adjustment in the statistics of the services inflation in Germany,” ECB President Mario Draghi said last week.

“(This) basically produced a much flatter seasonal adjustment and it meant that the December data came out lower than the 0.9 (percent). But fortunately this was a one-off event, so that the January data will not be distorted by this,” he said.

Eurogroup President Jeroen Dijsselbloem said earlier on Thursday consumer prices were unlikely to slow further and the current low level is not a major threat to economic recovery.

The October inflation level was a nearly four-year low and pushed the ECB towards a cut in its key lending key rate to a record low of 0.25 percent in November.

The monthly consumer price increase in December was led by a 0.6 percent rise both in prices of services and the highly volatile energy costs.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza

@alfonso_forex

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