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| The European Central Bank headquarters, Frankfurt.
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Eurozone1 annual inflation2 is expected to be 0.6% in April 2009 according to a flash estimate issued by Eurostat, the statistics office of the European Union. It was also 0.6% in March.
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 (17 times exactly anticipating the inflation rate and 7 times differing by 0.1 over the last two years).
Inflation at 0.6%, is well below the ECB target of "below but close to" 2% and the ECB President Jean-Claude Trichet, had said in early April that he wouldn't rule out "one" further rate cut, which hinted the ECB's benchmark rate could fall to 1% at the May 7th meeting of the Governing Council.
The ECB has cut the rate by three percentage points since October, reducing it to 1.25% in April.
"We are in uncharted waters, and there are still risks of a sudden emergence of unexpected financial turbulence," Trichet told guests at a lunch at the New York Federal Reserve hosted by the Foreign Policy Association last Monday.
"At 1.25% at the moment, our rate on refinancing operations is higher than the federal funds rate target range of 0-0.25%. But owing in particular to the very low rate on our deposit facility of 0.25%, this difference in policy rates does not translate into equivalent differences in money market rates," he said.
Trichet said he would not reveal any new measures until next week but said that ECB policy would continue to focus on its all-important banking sector.
“The banking sector is more than twice as important in the euro area as it is in the United States,” he said.
On Wednesday, the European Commission reported, that in April, the Economic Sentiment Indicator (ESI) for the EU and the Eurozone picked up for the first time since May 2007 (excluding a small blip in March 2008 for the EU). The Business Climate Indicator (BCI) for the Eurozone also increased in April.
1. 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.
2. Annual inflation is the price change between the current month and the same month of the previous year.
3. The MUICP flash estimate usually includes early price information representing approximately 95% of the Eurozone total consumption expenditure weight
