Euro zone core inflation stayed near four-year lows in October, countering arguments from ECB hawks for a rapid interest rate rise, although costly energy kept the overall rate high.
The core inflation measure, which excludes volatile prices of unprocessed food and energy and is keenly watched by the ECB, was 1.5 per cent year-on-year, data showed today.
This was unchanged from September's rate, which was at its lowest level since March, 2001. In August the index was at 1.4 per cent.
The European Union's statistical office, Eurostat, also confirmed its earlier annual estimate that overall inflation was 2.5 per cent last month against 2.6 per cent in September, slightly higher than analysts had expected.
Consumer prices in the 12 countries using the euro rose 0.3 per cent month-on-month, Eurostat said. "We anticipate that core inflation will remain capped by continuing wage moderation amid still high unemployment across the region," said Howard Archer, economist at Global Insight.
"The ECB can afford to hold off from hiking interest rates until at least next March, despite the central bank's decidedly more hawkish rhetoric of recent weeks," he added.
Politicians, business leaders and trade unions have all urged the ECB not to raise rates soon, arguing it could damage the euro zone's nascent economic recovery.
The bank's rhetoric has been anti-inflationary recently, with some of its Governing Council members wanting to make credit more expensive before high energy prices trigger wage demands and boost prices in other sectors. The ECB is charged with keeping consumer price growth below, but close to 2 per cent.
Some analysts said the case for higher interest rates had been strengthened by the health economic growth figures. Euro zone economic growth accelerated to 0.6 per cent in the third quarter from 0.3 per cent in the second.
The European Commission expects the recovery will continue next year and the economy will reach its potential growth rate of 2 per cent. Most financial institutions see euro zone economic growth in 2005 at 1.2-1.3 per cent, down from 2.1 per cent last year.