FXstreet.com (Barcelona) - According to a flash estimate by
Eurostat, Eurozone inflation remained unchanged at 2.2% in
December, the same rate as in November, which was the lowest since
December 2010. A further decline in energy price inflation (from
5.7% to 5.2%) was offset by an increase in the food, alcohol
inflation (from 3.0% to 3.1%) and a slight pickup in the core rate
(from 1.4% to 1.5%).
Looking ahead, however, Eurozone inflation is expected to resume
its gradual descent. "Indeed, with energy price inflation set to
fall further (as previous sharp increases drop out of the annual
comparison), and core inflation remaining low, we expect overall
inflation to drop well below 2% around the middle of this year.
What is more, the bleak growth outlook for the region suggests that
underlying inflationary pressures are likely to remain muted for
quite some time thereafter." writes Martin Van Vilet, at ING.
This gives the ECB scope to further ease its interest-rate stance.
However, many governing council members seem very reluctant to cut
interest rates further, also given the potential unintended
consequences from taking the deposit rate into negative territory.
"This means that, for now, with tensions on Eurozone debt markets
easing and global growth momentum seemingly picking up, the ECB
will likely maintain its wait-and-see stance on interest rates.
However, if a recovery fails to materialize, the ECB might still be
forced into further action." he warns.