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Eurozone inflation eases to 2.6% in April

30 April 2012, 20:18 CET
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(BRUSSELS) - Eurozone inflation eased only slightly to 2.6 percent in April from 2.7 percent in March, data showed Monday, hitting hopes of recovery before a key European Central Bank meeting on interest rates.

If confirmed, a first estimate for April from the European Union's Eurostat agency will mark the 17th month running during which inflation has exceeded the ECB target of "below, but close to, 2.0 percent."

"While any edging back in inflation is welcome, the fact is that Eurozone consumer price inflation has not fallen back overall so far in 2012 as had been hoped for at the start of the year, but instead has been locked in a 2.6-2.7 percent (range)," said Howard Archer, chief economist for IHS Global Insight.

The figure comes ahead of the ECB's regular monthly policy-setting meeting Thursday when the bank is expected to leave its benchmark interest rate steady at 1.0 percent despite fears of a resurgence of the sovereign debt crisis, notably due to the situation in Spain.

"The ECB seems generally reluctant to take eurozone interest rates any lower given current and likely continuing sticky consumer price inflation," Archer said.

Analysts said the drop appeared largely to be due to a fall in energy costs after a strong increase in crude a year ago due to the Arab Spring, as well as a drop in food inflation.

"Elevated oil prices could cause eurozone inflation to be sticky for some time," Archer added. "This would be a blow to eurozone recovery prospects."

Economist Ben May of Capital Economics agreed that inflation was likely to remain above the ECB's 2.0 percent target through the year and this "supports the view that the eurozone will fall deeper into recession."

"We we believe that (ECB) rates will remain at the current low level at least until the end of 2013 and perhaps even longer," said Peter Vanden Houte of Global Economics ING.

Eurostat's final inflation figure will be released May 16.

Several eurozone nations have already released estimates for April, with Spain prices rising 2.0 percent and Italy steady at the higher rate of 3.3 percent.


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