FRANKFURT- Euro zone inflation accelerated in November and its most closely watched components remained high, data showed on Friday, adding to the case for a more cautious European Central Bank interest rate cut next month.
Consumer price inflation in the 20 countries sharing the euro stood at 2.3 percent in November, according to the data from Eurostat. That was higher than 2.0 percent a month earlier and the ECB’s 2 percent target but in line with expectations.
Inflation mostly rose on a statistical base effect, as last year’s exceptionally low figures were knocked out of the time series, replaced by still relatively modest, but somewhat higher figures, leading to a 0.3 percent fall in prices on the month.
Underlying inflation, the ECB’s prime focus when setting interest rates, meanwhile held steady at 2.7 percent, as the small slowdown in services costs was offset by higher goods inflation.
Price growth in services, the single largest item in the consumer price basket, has hovered on either side of 4 percent for the past year and slowed to 3.9 percent this month from 4.0 percent.
Services prices tend to be higher than the overall average but policymakers argue that a figure closer to 3 percent is desired since the drag from energy and imported goods will fade over time.
Friday’s reading, however, does little to alter the overall picture that inflation is slowly heading back to the ECB’s target on a more durable basis next year, so further cuts in the 3.25 percent deposit rate remain warranted. The key question for now is whether a 25 basis point move on Dec. 12 is enough or whether the bank should opt for a bigger, 50 basis point move.
