Euro Inflation Highest in Three Years; Unwelcome Development for ECB
THE TAKEAWAY: Euro CPI highest in three years -> new data puts ECB in a tight fix -> Euro stalls ahead of 2-day high
Final EMU consumer price data for September were released today, showing a correlation with predicted numbers as yearly inflation reached its highest level in almost three years, coming in at 3.0%. Monthly data also matched expectations, with prices rising by 0.8% since August. The monthly rise was one of the largest price hikes since the Eurozone’s creation.
A breakdown of the data shows that the price hike was led by Eastern European countries like Romania, which saw a stunning yearly inflation figure of 6.9%. EMU heavyweights Germany and France saw yearly increases of 2.2% and 2.1%, respectively.
The significant acceleration in price action is expected to cause further problems for the European Central Bank as it struggles to find a solution to the ever-looming issue of a possible Greek loan default. The ECB was widely expected to lower interest rates last week in a bid to stimulate the beleaguered European currency; however, it chose not to do this so as to maintain a tighter leash on inflation. The latest data make a downgrade of interest rates ever more unlikely, further limiting the ECB’s options as it searches for an answer.
The Euro stopped its climb skyward as the latest data shook the market, falling just shy of reaching a 2-day high at 1.38327 against the Buck, and the dollar rallied slightly as market players feared that their Euros might be worth less than previously believed.
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