Inflation Pressures to Ease Further as Recession Deepens, Says Bank of Spain

(CEP News) Frankfurt - As the euro zone falls deeper into recession, inflationary pressures will ease further, the Bank of Spain said in its monthly bulletin published on Tuesday.

"The decline in commodity prices and the marked slowdown in economic activity are leading to an additional reduction in inflationary pressures," the central bank said. "The most recent information on the situation suggests an additional deterioration in economic activity in the final part of 2008."

Turning to the domestic economy, the Bank of Spain said that Spain would register a second economic contraction in Q4, officially putting the country in a technical recession, along with Italy and Germany.

"The indicators relating to the portion of the fourth quarter experienced thus far suggest the pace of deterioration in the Spanish economy will continue," the central bank said in its report, adding that, as a consequence, the government will likely post a stronger-than-expected deficit in 2008.

Written by CEP News European Staff in Frankfurt, eunews@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

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