Consumer prices in the Euro-Zone increased 0.3% in August, with the annual rate of inflation falling 0.2% from the previous year to mark the third straight monthly decline, which was in-line with expectation. At the same time, the core CPI grew 1.3% for the second month amid forecasts for a 1.2% rise, and the European Central Bank is likely to hold a neutral policy stance going forward as prices remain sticky. However, as households face a weakening labor market pared with tightening credit conditions, the slump in economic activity may continue to add downside pressures on inflation, and the central bank is likely to maintain a dovish outlook going forward as policy makers anticipate price pressures to remain subdued going into the following year.
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