Bloomberg News

Italy’s Inflation Rate Rises to 3-Year High on Tax Increase

October 31, 2011

Oct. 31 (Bloomberg) -- Italy’s inflation rate rose to a three-year high in October as an increase in sales tax included in a government austerity plan boosted consumer prices.

The inflation rate based on European Union measurements climbed to 3.8 percent from 3.6 percent in September, Rome-based national statistics office Istat said in a preliminary report today. That compares with a median forecast of 3.5 percent by 16 economists in a Bloomberg News survey. Prices advanced 0.9 percent from September.

Inflation rates in the euro region are “likely to stay clearly above” 2 percent in the coming months before falling below the central bank’s ceiling in 2012, outgoing European Central Bank President Jean-Claude Trichet said on Sept. 8, basing his assessment on “moderate economic growth.”

Italy’s government in August passed 54 billion euros ($73 billion) in austerity measures in exchange for ECB purchases of the nation’s bonds. The spending cuts and tax increases, which may weigh on growth, included a one percentage-point increase in the value-added tax rate to 21 percent that took effect on Sept. 17.

Prime Minister Silvio Berlusconi, put on the defensive over Italian finances at a crisis summit of European leaders last week in Brussels, presented a blueprint for implementing the austerity measures, including plans for sales of public assets and changes to labor rules to make it easier for employers to fire workers.

The demand for discipline underscored European leaders’ concern about the vulnerability of Italy, whose debt totals more than $2 trillion, or almost 120 percent of its gross domestic product.

--With assistance from Giovanni Salzano in Rome. Editors: Andrew Davis, Andrew Atkinson

To contact the reporter on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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