Deflation

EURO ZONE: October producer prices were down 0.5% on the month and down 1.4% on the year against expectations of -0.2% and -1.0%, respectively.

Producer prices declined more than forecast in October, highlighting the deflationary risks facing the euro-zone economy. With consumer price inflation already barely positive, the absence of pipeline pricing pressure contained in this indicator gives the European Central Bank plenty of justification to add more liquidity. Whether its board members feel politically and technically able to ease policy when they meet on Thursday is another matter. (AM)

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