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Last Updated: Tuesday, 31 October 2006, 12:07 GMT
Euro inflation continues to cool
Euro notes
The inflation rate is well inside the ECB comfort zone
Lower oil costs helped push headline eurozone inflation down to 1.6% in October, official data shows.

Annual inflation for the 12 nations using the euro fell from 1.7% in September, the EU Eurostat agency said.

The European Central Bank (ECB) has set a 2% inflation comfort zone and raised benchmark interest rates to 3.25% this month to tackle rising consumer prices.

But there are worries that lower oil costs will free consumer spending power, and that prices could then rise.

That could alarm the European Central Bank, which has already indicated there may already be another interest rate rise in the pipeline.

However, David Brown, European economist at Bear Stearns, said: "With eurozone inflation easing again to 1.6% in October, the ECB seems to be over-stepping the mark on its inflation targeting.

"With the headline rate dropping below the 2% target and core inflation remaining benign at 1.5%, it might suggest that ECB rate policy settings are too tight."

Oil prices, seen as one of the main drivers of inflation, have fallen from their peak of $78 a dollar in July to around the $59 mark.




SEE ALSO
Eurozone rates increased to 3.25%
05 Oct 06 |  Business
Energy slide cools Euro inflation
15 Sep 06 |  Business
Inflation eases slightly in July
15 Aug 06 |  Business
ECB raises interest rates to 3%
03 Aug 06 |  Business

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