Euro zone consumer prices fell this month by more than economists had expected, reinforcing expectations the European Central Bank will not raise interest rates yet despite a nascent economic recovery.
Prices in the 16-country area fell 0.3 per cent year-on-year in September, the European Union statistics office estimated. They had dipped 0.2 per cent in August, 0.7 per cent in July and 0.1 per cent in June.
Economists polled by Reuters had on average expected a 0.2 per cent fall in September.
The ECB wants inflation to be just below 2 percent. It says it does not expect deflation -- which it defines as prolonged price falls accompanied by expectations of more declines -- because the current drops in prices are mainly a result of the record high cost of oil a year earlier.
A monthly consumer survey by the European Commission showed on Tuesday that inflation expectations among households and companies rebounded from all-time lows in September after six months of falls.
With survey and hard data signalling the euro zone is likely to have emerged from recession in the third quarter, markets are speculating when the ECB might start tightening policy after cutting borrowing costs to 1 percent earlier this year.
Economists now expect the bank will not raise rates until the third quarter of 2010.
A detailed breakdown of the inflation estimate and month-on-month data will be available on October 15th.
Reuters