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Eurozone consumer prices rose 0.6% year-on-year in November, recovering from a 0.1% decline in the previous month, preliminary data from Eurostat showed on Monday. Economists were looking for an increase of 0.5%. Final CPI data is due on December 16.
Inflation in the 16-nation bloc was in the negative territory since June. Meanwhile, the European Central Bank aims to keep inflation rates below, but close to 2% over the medium term.
Economists' reaction:
ING's Martin van Vliet noted that energy-price base effects have pushed Eurozone inflation back above zero in November and will push it up further in the near term, but inflation prospects for the region remain subdued. According to the economist, this will allow the ECB to tread cautious in unwinding its emergency stimulus measures.
"But we continue to expect inflation to stay comfortably below the ECB's medium-term target," the economist said. "Indeed, the amount of slack in the economy should keep core inflation on a downward trend for some time to come, mitigating some of the upward pressure from energy prices. The strong euro will also help temper price increases."
"The continued benign inflation outlook means that while the ECB may be on the verge of scaling back some of it emergency liquidity operations, official rate increases remain a distant prospect."
UniCredit's Marco Valli thinks the bias is for a downward revision of today's figure.
"It is very likely that almost all the acceleration came from energy, due to higher prices of oil products vs. October and an unfavorable base effect," the economist noted. "Food inflation likely was off the October low but remained deeply in negative territory, while core inflation should have eased further."
"Most likely, inflation will keep rising in December, approaching the 1% area."
BNP Paribas's Clemente De Lucia expects the ECB to set its 2011 inflation forecast well below 2% when the Governing Council meets on Thursday.
"Going forwards, headline inflation should continue to increase, driven up by less favourable energy related base effects and by the projected increase in commodity prices. On the contrary, core inflation is likely to continue to moderate."
"Given the ongoing bounce in activity, it is likely that the ECB will revise upwards its growth forecasts for 2009 and 2010 with respect to September's projections," the economist said. BNP Paribas do not expect the central bank to make any major changes to its 2009 and 2010 inflation forecasts.
"Under these conditions, the ECB is not expected to raise the refi rate from an historical low of 1% until H2 2011."
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