"Inflation Rate to Drop to 2% in European Zone by End of 2009" – British Analyst

Business Materials 2 August 2008 15:07 (UTC +04:00)

Azerbaijan, Baku, 2 August / Trend corr. A.Badalova / The inflation rate will drop to 2% in the European zone by the end of next year, according to the forecast of the British consulting company on economic research Capital Economics.

Ben May, an analyst in the Capital Economics, told Trend that weakening of energy and food price inflation in the second half of 2008 to lead to a sharp slowdown in overall CPI inflation in European zone.

We expect a slowdown in headline CPI inflation to around 3.0% by March 2009 and to 2.0% by the end of next year. "The basis index may drop by 1% by March 2009," May said.

According to the preliminary data by the statistic bureau Eurostat, the inflation rate in 15 countries has reached the historical maximum 4.1% in July 2008. Growth of CPI touched 4% in June against 3.7% in May.

According to British company, the headline rate may have fallen to around 3% by March 2009 and 2% by the end of 2009 due to weakening of energy and food price inflation.

British company forecasts the oil price to steadily fall below $100 per barrel by early 2009.

"By March, lower energy price inflation might have reduced headline inflation by more than one percentage point. We expect energy inflation to ease to around 7% by March 2009," May said.

The meeting of the United States Federal Reserve System (FRS) and European Central Bank is scheduled for 5 and 7 August.

According to Capital Economics, ECB to decrease percentage rate only in 2009.

"ECB will start to cut interesting rate at the beginning of 2009 under influence of restrained increase of salaries and deceleration of currency," May said.

In July, ECB has increased its basis percentage rate by 0.25%, to 4.25%. The basis percentage rate in FRS totals 2%.  

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