Declining oil prices relieve pressure on eurozone consumer price inflation

Annual consumer price inflation in the eurozone has relaxed in November due to falling energy and food prices, according to Eurostat.

Eurozone annual inflation is expected to fall to 2% in November, representing 0.2% decline compared with October rates, according to a flash estimate by Eurostat, the statistical office of the European Union (EU).

The decrease to annual inflation in the eurozone was helped provided by lower energy and food prices, Eurostat said.

Cheaper oil prices help ease eurozone inflation

Despite energy prices increasing by around 9.1% in the year to November, the pace of price increases has slowed somewhat, with the recent increase lower than the 10.7% recorded in October, the EU statistics office said.

As it stands, headline inflation is within the European Central Bank’s (ECB) target range, with the ECB looking to get annual inflation in the eurozone to below 2%.

‘The slight drop in inflation was mainly due to the fall in energy prices,’ ING senior eurozone economist Bert Colijn said.

‘The drop in the oil price was much larger than the slide in inflation suggests, mainly caused by logistical problems that hindered supply in Germany and Netherlands for example, but also by higher taxes.

‘The logistical issues are likely to fade out, which suggests that the inflation rate will continue to fall modestly over the coming months,’ he added.

G-20 leaders convene ahead of OPEC meeting

Over the weekend, G-20 leaders will meet in the Buenos Aires, Argentina with falling oil prices likely to be topic high on the agenda.

Oil prices have eroded by more than 25% after hitting a four-year peak back in October, with the rapid erosion putting pressure on OPEC countries to agree to make supply cuts when they meet next week in Vienna.

‘All eyes are now on the upcoming OPEC meeting, but the get-together could easily turn out to be a formality,’ PVM Oil Associates senior analyst Tamas Varga said in a research note earlier this week.

‘It might well be the case that when oil ministers from producing countries sit down a week later in Vienna they will merely make official what was agreed this weekend at the G-20 summit.’

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