Belfast Telegraph

Wednesday 3 September 2014

Eurozone inflation falls to new low

Inlfation across countries using the euro has fallen to a three-year low

Inflation across the 17 European Union countries that use the euro fell to its lowest level in over three years in April in a development that will pile pressure on the European Central Bank to cut its main interest rate.

Eurostat, the EU's statistics office, said consumer prices rose 1.2% in the year to April, way down on the 1.7% rate recorded in March and markedly below market expectations for a modest decline to 1.6%.

The preliminary April rate was the lowest since February 2010. Eurostat indicated that lower energy prices were largely behind the fall as well as reduced service sector inflation. A fuller explanation behind the drop will emerge in a more detailed report in May.

However, the fall in inflation could well mean that the ECB cuts its main interest rate from the already all-time low of 0.75% at its monthly meeting on Thursday, despite some reservations from some on the rate-setting governing council.

That pressure on the ECB now is even more acute as Eurostat also reported that unemployment in the eurozone rose to another record of 12.1% in March from the previous month's 12%.

The unemployment statistics mask huge differences across the eurozone and puts the ECB's dilemma in sharp relief. While Germany, Europe's largest economy, has an unemployment rate of just 5.4%, others such as Spain are languishing with a record jobless rate of 26.7%. Greece has the highest unemployment rate in the eurozone though its figures are compiled on a different timeline. In January, its jobless rate stood at 27.2%.

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