Euro zone inflation slowed as expected in September because of falling prices of unprocessed food and energy. As Amy Pollock reports it may increase pressure on Germany to ease up on ECB constraints.
The euro zone inflation numbers were a surprise to no one. Consumer prices across the 18 counties rose 0.3 percent year on year, slowing from 0.4 increases in July and August. Italy was worst hit - posting a second straight month of deflation. The figures were in line with forecasts but they didn't help the European Central Bank. It would rather headline inflation was closer to two percent. The stagnating euro zone economy is making that hard to achieve. Unemployment is still a problem - it even increased slightly in Germany this month. That leaves all eyes on ECB chief Mario Draghi, appropriately meeting in Naples this week. Simon Derrick is from Bank of New York Mellon. (SOUNDBITE) (English) SENIOR FX STRATEGIST AT BANK OF NEW YORK MELLON, SIMON DERRICK, SAYING: "It should bring pressure to bear on Germany to allow Draghi to do quantitative easing. However, there are still a great number of people within Germany, most notably today Has Werner Sinn, making clear their belief that the ECB has already moved beyond its mandate." Draghi says the ECB can't be expected to turn around the euro zone's sluggish economy on its own. The De Vere group's Tom Elliott says the key euro zone economies must do their bit first. (SOUNDBITE) (English) INTERNATIONAL INVESTMENT STRATEGIST AT DE VERE GROUP, TOM ELLIOTT, SAYING: "That primarily means Germany reflating, going easy on its austerity and allowing Paris and Rome to go easy on their austerity. And in turn Paris and Rome need to engage in structural reform and when those bits are in place, Draghi will say right, here goes quantitative easing. " The ECB's job was made a little easier by a falling euro - it touched near-two-year lows. And if the euro zone can keep its currency competitive, it may find it has a little bit of breathing space.