German and French prices rose at a moderate pace in August, data showed on Wednesday, but economists said that was unlikely to deter the European Central Bank from raising interest rates further.
In Germany, Europe's biggest economy, the EU's inflation measure showed consumer prices rose by 1.8 percent year-on-year, one tenth of a point lower than previously estimated. Spanish inflation slowed slightly more than expected in August, hitting an eight-month low, while France's consumer price index rose 2.1 percent year-on-year, in line with the Reuters consensus forecast.
But economists said Wednesday's data were unlikely to prevent the ECB from raising interest rates in October, probably by 25 basis points to 3.25 percent.
The ECB, whose target ceiling for inflation is 2 percent, has already raised its benchmark rate four times since last December, from historic lows of 2.0 percent, aiming to stem inflationary pressures from expensive oil and fast credit growth.
"The ECB is in a rate-raising phase," said Nicolas Claquin, economist at HSBC France. "Today's French data will not change the European Central Bank's analysis." The ECB will watch eurozone price data on Friday for signs of inflationary pressure after major eurozone economies reported robust growth in the second quarter of the year.
Forecasts gathered before Wednesday's price data showed the August eurozone inflation rate coming in at 2.3 percent on Friday, confirming an official estimate last month and easing from 2.4 percent in July.
"Given the numbers we have seen this morning from Spain and Germany ... there is a small chance that the number would be at 2.2 instead of 2.3 percent for the eurozone HICP on Friday," said Dominique Barbet, senior economist at BNP Paribas.
"But in any case, it is over 2 percent, so I do not see how that could influence the ECB's monetary policy." Marc Touati from Natexis Banques Populaires noted that Germany was far from encountering strong inflation. "Contrary to what (the ECB) is stubbornly saying regularly, the risk of inflationary drifting is particularly weak in the eurozone," he said. "Recent price developments in Germany, France, but also the entire zone confirm that again."
But ECB President Jean-Claude Trichet said on Monday the global economy was growing strongly and there was no room for complacency on inflation. He has noted recently that the ECB is in a posture of "strong vigilance" - wording that signals the ECB plans to raise its key interest rate at its next meeting in October.
ECB staff raised their inflation and growth projections last month and now see inflation in a range of 2.3-2.5 percent in 2006 and 1.9-2.9 percent in 2007. Economists said Wednesday's moderate inflation data was partly due to a decline in oil prices in August. Germany's HICP fell 0.1 percent month-on-month in August, also a tenth of a point lower than the preliminary estimate, the Federal Statistics Office said.
French statistics office INSEE said the country's consumer price index rose 0.3 percent month-on-month, with food becoming cheaper and the costs of clothes and shoes rising. In Spain, August consumer prices rose 3.7 percent year-on-year compared with a 4.0 percent rise in July and down sharply from a four-year high of 4.2 percent reached in January, the National Statistics Institute INE said.
Spanish inflation has long outpaced the eurozone as a whole, reducing the country's attractiveness to investors and the competitiveness of its exports.
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