Nevertheless, limited core inflation in January will not deter the ECB from hiking interest rates by a further 25 basis points on Thursday.
With economic growth likely to remain below trend in the near term at least and unemployment set to continue rising, there is a very real danger that individual insolvencies and mortgage repossessions will climb markedly further over the coming months.
With consumer price inflation below the 2% target level in both December and January and clearly below the levels forecast by the Bank of England in their November quarterly inflation report, a near-term interest rate cut suddenly looks a very real possibility again.
While it is clearly premature to sound the all-clear on inflation, the October consumer prices data are largely reassuring for the Bank of England and boost hopes that inflation has peaked,
With one member of the MPC voting for an interest rate cut in December and Bank of England chief economist, Charlie Bean, recently making some dovish comments, the odds of an interest rate cut early in 2006 are rising.
The MPC still has to see conclusive sustained evidence that 2006 pay settlements are remaining contained.
House prices are likely to remain relatively flat for an extended period,
Euro region labor markets are finally beginning to see genuine, if somewhat limited, improvement, boosted by the pickup in growth since mid-2005. Rising employment is key to boosting consumer spending across the euro region.
Flat export orders in February are particularly disappointing.
For now at least, the Bank of England will be very wary that a trimming of interest rates could excessively stimulate the housing market and risk sending house prices markedly higher. It certainly further rules out a move today.
