Euro zone inflationary pressures fell to a near three-year low in October, a forward-looking indicator showed this morning, suggesting inflation would fall sharply in coming months.
The New York-based Economic Cycle Research Institute said its Eurozone Future Inflation Gauge, which aims to predict cyclical turns in inflation in the next six to nine months, fell to a 33-month low in October to 101.9 from 105.3 in September.
Inflationary pressures fell across all four major euro zone economies in October, to a five-year low in France and 12-year low in Spain.
"With the EZFIG plunging to a 33-month low, having experienced its biggest two-month decline in nearly eight years, euro zone inflation is set to fall further," ECRI said in a release.
Official inflation in the euro zone tumbled to 2.1 per cent in November from 3.2 per cent the previous month, coming closer to the European Central Bank's ceiling of close but below 2.0 per cent.
The ECB cut rates by 75 basis points yesterday to 2.5 per cent, its biggest cut ever, highlighting downside risks to inflation. Its staff projections for inflation were also revised down to a mid-point of 1.4 per cent in 2009, making it easier for it to cut rates further as expected by economists.