Eurozone consumer prices down 0.1 percent in Oct

AP News
Posted: Nov 16, 2009 7:13 AM

Consumer prices in the 16 countries that use the euro fell by 0.1 percent in the year to October, official figures confirmed Monday.

Eurostat, the EU's statistics office, kept the rate unchanged from its preliminary estimate, in line with market expectations.

October's decline was the fifth in a row. In the year to September, prices fell by 0.3 percent.

Though falling prices may be good for hard-pressed consumers, it is a sign of just how shaky demand remains.

Of the 16 countries using the euro, Ireland saw prices fall the most, by 2.8 percent. Greece saw the biggest price rises, at 1.2 percent.

Inflation is expected to turn positive in the months ahead as last year's sharp falls in energy prices fall out of the annual comparison and growth returns _ figures last Friday confirmed that the eurozone returned to growth in the third quarter of 2009, albeit at a fairly anemic level of 0.4 percent.

Few analysts expect the European Central Bank to start raising borrowing costs anytime soon, though they think it is very likely that the bank will start reining in its liquidity-boosting measures over the coming months.

The ECB has cut its benchmark rate to a record low of 1 percent as price pressures dwindled during the recession.

"The latest data show that the risks of a deflationary spiral have receded but inflationary pressures remain muted," said Oliver Hogan, managing economist at the Centre for Economic and Business Research.

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"As such, we expect the European Central Bank to keep interest rates on hold until mid 2010," he added.

The European Central Bank is tasked with keeping inflation at, or just below, 2 percent.

In the 27-country EU as a whole, which includes non-euro members like Britain and Sweden, consumer prices rose by 0.5 percent in the year to October, up from 0.3 percent in September.

The EU's rate was markedly higher than in the eurozone mainly because inflation rates remain elevated in some countries in Eastern Europe, most notably in Romania, Lithuania and Latvia.