Eurozone inflation subsided towards the European Central Bank's goal in September even as consumer and business confidence rose tentatively, data showed on Thursday.
Prices paid by consumer rose 2.2 percent from a year earlier in September, a month in which oil prices hit record highs, after rising at a 2.3 percent rate in August, Eurostat said.
That was in line with economists' expectations and the closest the inflation rate has been since April to the ECB's target of keeping inflation close to but below 2 percent.
ECB officials are keeping a close eye on inflation in the light of higher oil prices and ECB Chief Economist Otmar Issing said earlier this week that such price rises were a tax on all.
Households have yet to turn more gloomy, with the European Commission's consumer sentiment index rising slightly to minus 13 in September after holding steady at minus 14 in August.
Business confidence edged up to minus 3 after remaining unchanged at minus 4 in August.
This did not change economists' expectations that eurozone interest rates would stay on hold for the time being, particularly as the overall sentiment indicator reversed some of its August gains in September.
"Despite some recently more hawkish comments regarding inflationary risks, we believe the ECB can leave interest rates unchanged until well into 2005," said Howard Archer of Global Insight.
Eurostat's early estimate of inflation in the dozen-member eurozone is based on information on consumer prices from a handful of the bloc's biggest member states as well as early information about energy prices.
"It covers the latest energy prices sent to us and includes this week's prices," a Eurostat official told Reuters.
She said that the energy price data was supplied by the European Commission which collated data from member states.
Still, analysts warned that inflation could pick up anew in October if higher energy costs started to feed through more extensively into the prices paid by inflation.
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