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Eurozone data to show inflation easing as oil prices moderate
10/24/2005
PARIS, Oct 23 (AFP): Eurozone indicators to be released in the coming week will show inflation easing in October as a result of recent moderation in oil prices, economists said.
Business confidence is expected to edge higher, but money and credit growth will probably give continued grounds for concern at the European Central Bank.
Eurozone inflation is expected to edge down to a provisional 2.4 per cent in October from the four-year peak of 2.6 per cent recorded in September. The decline will partly reflect the easing of oil prices from their recent highs, economists said.
"Oil prices have dropped by 20 per cent in euro terms since their Katrina-induced spike at the end of August. This points to a modest decline in the headline rate of euro zone inflation," said Holger Schmieding of Bank of America.
This will be good news for the European Central Bank, which is concerned that the recent rise in headline inflation could lead to an increase in longer-term inflation pressures.
"The projected fall in inflation could help ease concerns of an earlier than anticipated tightening (of monetary policy) by the ECB," said James Ashley and Nick Matthews of Barclays Capital.
Schmieding said that "in November and December, the base effect from the drop in oil prices in late 2004 may keep headline inflation close to 2.5 per cent."
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