Euro zone inflation unexpectedly slows in November

Euro zone core inflation unexpectedly slowed in November, offering yet another argument for the European Central Bank to ease policy on Thursday as price growth looks set to stay below its target for years to come.

Headline inflation across the 19-member euro area held steady at an annualised 0.1 per cent in November, below expectations for 0.2 per cent and well short of the bank’s target of a rate just below 2 per cent.

Core inflation, which has come under closer scrutiny because it strips out the impact of the sharp oil fall in oil prices, meanwhile eased to 0.9 per cent from an upwardly revised 1.0 per cent, missing analyst expectations for 1.0 per cent, data from Eurostat showed.

"November's weaker-than-expected euro-zone consumer prices figures give a final green light for the ECB to both increase the pace of its asset purchases and cut its deposit rate at tomorrow's policy meeting," Capital Economics economist Jonathan Loynes said.

“The ECB is likely to remain nervous that a further prolonged period of below-target inflation will lead to a bigger drop in inflation expectations,” Mr Loynes added.

The ECB is widely expected to ease policy on Thursday with markets only guessing what measures it would take from a wide range of options on the table.

The euro weakened a third of a per cent against the dollar on the fresh data, indicating renewed bets on easing.

The weaker core figure provides important ammunition for proponents of easing after the ECB's top hawks, including Bundesbank chief Jens Weidmann, argued the central bank should hold fire as headline data is distorted by oil prices while the underlying trend is healthier.

Reuters