The Eurozone continues to see weak inflation, as the consumer price index rose 0.9 per cent in a Eurostat flash estimate for November. This beat expectations of a 0.8 per cent increase and October's low of 0.7 per cent.
The rise is, however, well below the European Central Bank's target for inflation of just under two per cent. Jonathan Loynes of Capital Economics says: "The latest news on euro zone inflation and unemployment won’t do much to relieve the pressure on the European Central Bank (ECB) to take more action to support the fragile recovery and head off a potentially damaging bout of deflation."
Howard Archer, IHS Global Insight, on the ECB's reaction:
It is possible that the ECB will eventually go down the negative deposit interest rate route but we suspect they would prefer not to and will only do so if inflation falls appreciably further. We also suspect Quantitative Easing will prove to be too controversial a policy within the Governing Council to get adopted. Meanwhile, we expect the ECB to keep its refinancing rate at 0.25 per cent through to 2015, although it is not inconceivable that it could trim it to 0.1 per cent or even 0.0 per cent.