November inflation eases but still high

Greek consumer inflation eased to 4.9 percent year-on-year in November from 5.2 percent in the previous month but remained among the highest in the eurozone, weighing on the economy’s competitiveness. Greek inflation hit a 13-year high of 5.6 percent in September. Month-on-month, consumer prices rose 0.2 percent, the Hellenic Statistical Authority (ELSTAT) said yesterday. Hikes in value-added tax imposed by the government under the terms of a bailout by the European Union and the International Monetary Fund have contributed to the rise in consumer prices. Greece has raised the VAT rate to 23 percent from 21 percent and increased excise duties to boost budget revenues as it scrambles to slash deficits. The EU has revised this year’s inflation forecast for Greece to 4.6 percent from a previous 1.9 percent. «The moderation in the inflation rate came within expectations. Inflation is seen decelerating even more during the coming months,» Diego Iscaro, economist at Global Insight, told Reuters. «Falling activity levels and a very weak labor market should help to dilute inflationary pressures during the first half of 2011, although higher indirect taxes will limit the moderation of the headline inflation rate.» Other economists said recent tax hikes could even lead to a further pickup in inflation early next year. «We were expecting a very big decline in the rate of inflation from the start of next year,» Nick Magginas, economist at National Bank of Greece, told Bloomberg. «But thanks to the new tax hikes this will be significantly weaker than we thought. We are even likely to have a small rise.» Consumer price inflation in the 16 countries sharing the euro remained unchanged at an annual 1.9 percent pace in November, in line with expectations and signaling no pressures for rate hikes by the European Central Bank.

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