European inflation is slowing

It seems as though the worldwide response to the economic slowdown is taking effect, as for the second month in a row European inflation has slowed partly as a result of falling crude oil process.

This means that the European Central Bank (ECB) are now in a greater position to cut interest rates further even though just last week introduced a 0.5 percentage cut.

The ECB have switched their focus towards the real economy rather than just safeguarding against inflation.

The reduction in the costs of energy and the stability in food prices cooled inflation last month, although the EU has reconfirmed that the 3.6 percent year on year price increase still stands true.

The ECB’s main goal is to ensure that inflation remains below the 2 percent ceiling, however the recent impetus given by the rate cut will channel back into the financial markets and aim to stave off inflationary fears and, in return, stimulate both business and consumer confidence.

Following the recent cut, the euro fell 0.1 percent to $1.3610 against the dollar whilst European bonds advanced.

It is estimated that the ECB will probably lower its benchmark rate again this year and continue to do so through 2009, while inflation is expected to be around the 1.7 percent mark.

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