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Euro Area Inflation Gains Traction in November

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Euro Area Inflation Gains Traction in November

Euro area consumer inflation gained traction in November, easing concerns the 17-nation currency bloc would require a more drastic kick-start to help stimulate growth.

The Consumer Price Index, which monitors monthly price changes of a representative basket of goods and services, rose at an annual rate of 0.9 percent in November, according to official estimates from the European Commission. On a monthly basis, consumer prices declined 0.1 percent. Euro area inflation fell to a four-year low in October. It was the first time since February 2010 that consumer inflation had fallen below 1 percent.

Electricity and accommodation services had the largest positive impact on euro area annual inflation, official data showed. Electricity prices rose 4.9 percent in November, while accommodation services rose 4 percent. Heating oil, telecommunications and transport fuel had the largest negative impact, as prices for these goods and services fell between 3.4 percent and 7.1 percent.

Consumer prices rose in all but two euro area countries, Greece and Cyprus. Greece’s CPI fell 2.9 percent annually in November following a 1.9 percent decline the prior month. Consumer prices declined for the third consecutive month in Cyprus at a rate of -0.8 percent. CPI was highest in Finland at 1.8 percent.

The current pace of inflation will likely keep the European Central Bank at bay for the time being. On Monday ECB President Mario Draghi said the central bank was ready to intervene if inflation remained too low, but didn’t specify which policy tools would be used. The ECB unexpectedly cut interest rates to 0.25 percent in last month after inflation fell to 0.7 percent in October. Policymakers are reportedly considering negative deposit rates and other tools to combat deflation.

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