Inflation in eurozone continues to drop

The rate of consumer price inflation in the 17 countries using the euro fell to 1.1 per cent year-on-year in September, its lowest since February 2010 when it stood at 0.8 per cent, the EU’s statistics office Eurostat said yesterday.

The reading was down from 1.3 per cent in August and was well below the European Central Bank’s (ECB) official target of an inflation rate of close to but below 2 per cent.

Prices rose 0.5 per cent from August, as a 0.4 per cent drop in costs of food, alcohol and tobacco products and a 0.9 per cent decline in prices of services were offset by a 3.4 per cent jump in prices of non-energy industrial goods.

Volatile prices of energy were up by 0.5 per cent in September on the month.

ECB Executive Board member Peter Praet said on Tuesday inflation pressures in the eurozone remain subdued in medium term, including 2015.

The low inflation environment allows the ECB to keep an ultra-loose policy stance with the main refinancing rate at a record low of 0.5 per cent and the ECB said repeatedly it stood ready to react if the economy needs a further policy boost.

With inflationary pressures low, economic optimism in the eurozone brightened for the fifth month running in September and jumped to a two-year high on the back of improving confidence across all sectors and confirmed the recovery was underway.