Euro area inflation at 2% – domestic price pressure remains low

The flash estimate for consumer price inflation in the euro area was 2% in November and therefore 0.1 points lower than in the previous month. At 9.1%, energy prices in the basket of consumer goods rose again sharply, albeit not to the same extent as in October, when they climbed by 10.7%. Food products inflation was also somewhat more moderate at a high level, while the increase in services inflation was weaker. Inflation has therefore been above the ECB’s target of “below, but close to, 2%”, for six months now.

Nonetheless, domestic inflationary pressure in the EMU remains muted. This is evident from the core rate of inflation, which excludes the more volatile price components of unprocessed food and energy products. It fell from 1.2% to 1.1% in November. Stronger inflationary pressure would require a much stronger and more permanent increase in the core rate, and there is still no evidence of this.

Inflation eased in most countries – for example, in Germany, France and Spain – while remaining unchanged in Italy at 1.7%. At 2.2% in both France and Germany, it remained above the euro area average. Energy price increases in France are likely to have been fuelled by the increase in petrol tax in spring, while supply shortages in Germany due to low water levels on the Rhine river drove up petrol and diesel prices here.

In the EMU, energy prices and to a certain extent food prices too, continued to fluctuate the most. The price of oil is the decisive factor influencing the price of energy goods in the basket of consumer goods. It has eased considerably of late, from a little over USD 70 at the end of October to less than USD 60. However, it will need to consolidate at this low level before we see a gradual decline in euro area inflation in the year ahead.

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