Consumer expectations of inflation jumped, and economic sentiment weakened more than expected, the EU statistics office reported today.
Eurostat estimated that Euro zone inflation was stable at the European Central Bank's (ECB) target for the 12th straight month in August. The agency found consumer prices in the 13 euro countries rose 1.8 per cent year-on-year in August, the same as in July and in line with market expectations.
The ECB wants to keep inflation below but close to 2 per cent. Price growth has been at that target since September 2006.
But a monthly European Commission survey showed inflation expectations 12 months ahead, a factor the ECB watches closely in policy decisions, surged to 26 points in August from 19 in July - the first increase in nine months. Producer inflation expectations remained stable at 13.
Markets expect the bank will refrain from an interest rate rise that was earlier signalled for September 6th so as not to further damage sentiment after market turmoil and problems at some German banks in the wake of the US subprime mortgage crisis.