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Euro inflation rate exceeds forecasts

Inflation in the euro area progressed quicker than economists forecast in November, which moved the European Central Bank towards its goal for the first time in four months.

The median forecast among leading economists had been for 0.8 per cent inflation, but the rate rose to 0.9 per cent from 0.7 per cent in October.

Although it marks the tenth straight month that the inflation has been less than the ECB’s two per cent goal, things are set to improve eventually.

Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam, said he expects the "trend of disinflation" to continue in the months ahead, as a weak labour market, the strength of the euro and the sharp drop in wholesale food prices all take effect.

It follows a month when the ECB unexpectedly halved its key refinancing rate to 0.25 per cent, in a bid to prevent slowing inflation from taking hold in the euro-area economy, which remains fragile.

By Gary Cooper