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Euro zone inflation stable at 0.2%, still far off ECB target

Euro zone inflation stable at 0.2%, still far off ECB target

BRUSSELS: Euro zone inflation was unchanged in July as a further decline of energy prices negated the impact of more expensive industrial goods and services, leaving the European Central Bank with more work to do to push up prices.

The European Union’s statistics office Eurostat said on Friday that consumer prices in the 19 countries sharing the euro rose by 0.2 percent year-on-year in July, as in June.

The flash estimate also matched market expectations, although Thursday reports of a mere 0.1 percent reading in Germany and the return of deflation in Spain in July had suggested the euro zone figure could have been even weaker.

Excluding energy and unprocessed food – what the European Central Bank calls core inflation – prices were up 0.9 percent from 0.8 percent in June. The market expectation was for no change.

Teunis Brosens, economist at ING, said that the question was whether this marked a trend or was the sort of one-off seen in previous months, such as May.

“It’s too soon to declare a real strengthening of core inflation,” he said.

Conversely, with core inflation higher than forecast, energy deflation must have been stronger than expected, with the delayed impact of autumn price declines feeding through into longer-term gas contract and also falling oil prices this month.

This could lead to even lower overall inflation in the coming months.