Inflation in the euro-zone was steady at 2.2 per cent in December, according to a tentative estimate issued by the EU's statistical agency yesterday. The rate, unchanged from November's final figure, has come in slightly below consensus forecasts for the month. Una McCaffrey reports.
The agency warned, however, that the estimate, which is based on early returns from Italy, Germany and Belgium as well as energy prices, carried significant uncertainty in light of the "major structural change" caused by the introduction of the euro at the start of last year. A final figure, including returns for all euro-zone states, will be published later this month.
A number of forecasters are expecting inflation in the Republic to have risen further in December, to touch 5 per cent in January as the full effects of price increases linked to last month's Budget are felt.
Economists said yesterday's estimated euro-zone inflation rate was unlikely to deter the European Central Bank (ECB) from cutting interest rates this year.Mr Alan McQuaid, chief economist with Bloxham Stockbrokers, believes the ECB's attention will focus on sluggish growth in core euro-zone states such as Germany rather than price growth as 2003 progresses.
"I don't think this is going to stop the ECB from cutting rates again," said Mr McQuaid, highlighting the weakness of the German economy. "We're going to see another rate move in the first half of this year. The focus will have to be on Germany whether people like it or not."
