Eurozone annual inflation is expected to be -0.3% in September 2009 according to a flash estimate issued by Eurostat, the EU statistics office said today. It was -0.2% in August, showing that deflation slightly accelerated. In a separate development, the European Central Bank announced it had lent banks in the Eurozone €75.2 billion today in a second 12-month auction.

Eurostat says 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 available4 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 (18 times exactly anticipating the inflation rate and 6 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, Slovakia and Finland.

ECB

The European Central Bank said today that it had agreed to lend banks €75.2 billion for 12 months at the current benchmark interest rate of 1%, to boost credit flows and aid the recovery in the Eurozone economy.

Last June, the ECB held its first 12-month auction with Eurozone banks. In what was termed a "stimulus by stealth," it lent a massive €442 billion for 12 months to free up liquidity.