Eurozone1 annual inflation2 is expected to be 3.2% in October 2008 according to a flash estimate issued by Eurostat, the Statistical Office of the European Union. It was 3.6% in September. An ECB rate cut of 0.5% is likely next week
Last Monday, European Central Bank President Jean-Claude Trichet, signalled that the ECB Governing Council will cut the benchmark rate at its meeting next week.
The recent decline in inflation and the likelihood of a fall in 2009 below the ECB target of "below but close to" 2%, is likely to result in a cut next Thursday to 3.25%.
Finfacts Report: Trichet signals ECB interest rate cut next week; Benchmark rate may fall to 3.25%
Computation of flash estimates
Eurozone inflation is measured by the Monetary Union Index of Consumer Prices (MUICP). To compute the MUICP flash estimates, Eurostat uses early price information relating to the reference month from Member States for which data are available3 as well as early information about energy prices.
The flash estimation procedure for the MUICP combines historical information with partial information on price developments in the most recent months to give a total index for the Eurozone. No detailed breakdown is available. Experience has shown the procedure to be reliable (15 times exactly anticipating the inflation rate and 9 times differing by 0.1 over the last two years).
- The Member States of the Eurozone are Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia and Finland.
- Annual inflation is the price change between the current month and the same month of the previous year.
- The MUICP flash estimate usually includes early price information representing approximately 95% of the Eurozone total consumption expenditure weight .
