Eurozone inflation continues sliding

Inflation in the 15-member euro area is expected to continue its downward trend this month.

According to a flash estimate issued by Eurostat in Brussels, inflation in the eurozone by the end of this month is expected to fall to 3.6 per cent, a slight drop of 0.2 per cent on August.

Significantly, according to the EU's statistical arm, this is the second drop in a row, following a peak euro inflation reached last July at four per cent.

Malta's inflation last August was the second highest in the euro area at 5.4 per cent and no estimates have been published yet for this month.

Despite the positive downward trend, the European Central Bank (ECB) is not expected to announce any change in interest rates when Central Bank governors meet in Frankfurt today.

According to economic observers, the slower price growth across the euro area this month is mostly a result of a fall in oil prices, which declined to about $96 per barrel from a peak of $147 in July.

The ECB wants inflation to be just below two per cent over the medium term but soaring oil and food prices have kept the gauge well above its target since September 2007.

Seeking to anchor inflation expectations and prevent a wage-price spiral, the ECB raised eurozone interest rates by 25 basis points to 4.25 per cent in July.

Meanwhile, the economy in the EU is still underperforming and fears of more "bad weather" abound.

According to a European Commission survey, the eurozone economic sentiment indicator eased in September to 87.7 points from 88.5 points in August. The drop, which brought the index to the lowest level since November 2001, was worse than economists had forecast.