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(CEP News) Frankfurt - The euro zone inflation rate slowed to 1.6% year-over-year in December, its lowest level since October 2006, according to Eurostat 'flash' estimates. Expectations had called for an inflation rate of 1.8% in the 12 months to December, down from November's 2.1% print.
"Despite Eurozone inflation readings having somewhat disappeared off markets' radar, we still think at the Dec Eurozone HICP is of great interest, as not only would the materialisation of our forecast mark a 26-month low, but it would strengthen our call for a disinflation scenario in 2009," IDEAglobal economist Lorenzo Cella had said ahead of the inflation data release. "Indeed, the favourable ramifications for the inflation trajectory of a major recessionary phase in the Euro area, couple with a likely fall in oil prices will drag the 2009 euro zone headline inflation down to around 1.1%-1.4%, with a scope for a negative y/y rate around mid-2009." The euro dipped slightly on the lower-than-expected inflation data, slipping briefly to a session low of 1.3392 before recovering. It is currently trading down 1.74% at 1.3397 USD. Written by CEP News European Staff in Frankfurt,
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