Inflation across the Eurozone hit a two-year high in September in more good news for Mario Draghi in his war with stagnant prices and sclerotic growth.
Prices rose by 0.4 per cent over the 12 months to September, Eurostat said this morning, as measured on the consumer prices index (CPI). That was in line with provisional estimates and up from a rate of 0.2 per cent in August.
Inflation in Germany hit a 16-month higher of 0.5 per cent in September, while both Spain and Italy exited deflation.
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The European Central Bank (ECB) targets an inflation rate of "below, but close to" two per cent – a level which it has not hit since the beginning of 2013. In the face of weak demand and slow economic growth, Draghi, president of the ECB, unleashed a massive stimulus package which has left interest rates at their lowest level in the history of monetary policy – minus 0.4 per cent – and resulted in the ECB buying €80bn a month of government and corporate bonds.
Draghi will take comfort from the fact that his policies appear to be gradually working, with inflation creeping up from negative levels experienced at the beginning of 2015 and 2016.
The ECB meets on Thursday for its next monetary policy decision. It is not expected to act, although markets will be looking carefully for any indication as to whether the ECB is planning to extend its quantitative easing programme which is currently due to end in March 2017. Reports the central bank was considering tapering the bond-buying caused the euro to leap earlier this month.
Howard Archer, chief economist at IHS Markit said: "Stubbornly weak Eurozone core inflation and likely ongoing lacklustre economic activity suggest to us that the ECB will have some more work to do."
Core inflation, which strips out the volatile swings in the prices of food and fuel and is used by central banks as a better indicator of medium-term, domestically-oriented inflation, has failed to break through the one per cent barrier. It came in at 0.8 per cent in the year to September, the same level in August.