Euro zone Oct inflation at 3 pct despite cooler growth

Friday, 18 November 2011 00:00 - - {{hitsCtrl.values.hits}}

BRUSSELS (Reuters): Euro zone inflation held steady at 3.0 percent for a second month in October, the EU said on Wednesday, as oil prices pushed up the cost of living and complicated the European Central Bank’s role in dealing with the bloc’s stagnating economy.

Now at a three-year high, consumer prices in the 17-nation currency area rose 0.3 percent in October on a month-on-month basis to reach the 3.0 percent level on an annual basis, the European Union’s statistics office Eurostat said.

Both figures were in line with consensus figures from a Reuters poll of economists.

Inflation in October was above the ECB’s target of close to, but under 2 percent. Many economists expect new ECB President Mario Draghi to repeat this month’s 25-basis point interest rate cut to 1.25 percent again in December to boost the euro zone economy.

European Commission President Jose Manuel Barroso warned on Wednesday that the euro zone’s two-year economic recovery had run out of steam and said growth would be low -- at best -- while unemployment would remain at about 10 percent for the next two years.

With Brent crude at over $110 a barrel, supported by growing supply concerns and tensions over Iran’s nuclear programme, energy costs remain high in Europe, however.

Excluding energy, consumer inflation in the euro zone was 2.0 percent in October, much more in line with the ECB’s goal, but some economists do not expect higher oil prices to abate until March.

Transport price inflation was 5.8 percent in October, the highest in the euro area index, followed by alcohol and tobacco at 4.4 percent on an annual basis. On a country-by-country basis, consumer prices rose 3.4 percent in Belgium and by 3.0 percent in Spain in October versus the same month a year ago. Price inflation was 2.5 percent in France and 3.8 percent in Italy, where the government raised value added taxes to convince markets it can service its debts.