Eu­ro­zone Novem­ber in­fla­tion stays at 1.9 per­cent

The Pak Banker - - Company& -

LONDON: In­fla­tion in the 16 coun­tries that use the euro re­mained be­low the Euro­pean Cen­tral Bank's tar­get of 2 per­cent dur­ing Novem­ber, while the un­em­ploy­ment rate rose to a 12 year high in Oc­to­ber, of­fi­cial fig­ures showed Tues­day.

In its pre­lim­i­nary es­ti­mate, Euro­stat, the EU's statis­tics of­fice, said con­sumer price in­fla­tion rose 1.9 per­cent in the year to Novem­ber for the sec­ond month run­ning. The Euro­pean Cen­tral Bank's tar­get is to keep in­fla­tion "close to, but be­low" 2 per­cent.

A num­ber of an­a­lysts said in­fla­tion would rise to 2 per­cent or even higher amid ris­ing en­ergy and com­mod­ity costs.

Even though in­fla­tion could rise a lit­tle above the 2 per­cent thresh­old in the com­ing cou­ple of months, most an­a­lysts said that price pres­sures re­main fairly well-con­tained and that, as a re­sult, the cen­tral bank will likely keep its main in­ter­est rate un­changed at the record low of 1 per­cent for many months to come, if not for all of 2011.

Higher in­ter­est rates are the last thing many of the eu­ro­zone's in­debted coun­tries, such as Ire­land, Por­tu­gal and Spain, need at the moment.

In­stead, the ECB is likely to con­firm that it will main­tain spe­cial post-cri­sis mea­sures to give banks cheap and easy ac­cess to liq­uid­ity when it com­pletes its lat­est pol­icy meet­ing on Thurs­day, given the wors­en­ing govern­ment debt cri­sis. Last week­end, Ire­land be­come the sec­ond coun­try to be bailed out fol­low­ing Greece.

"There is lit­tle pol­icy dilemma re­gard­ing price de­vel­op­ments at this stage, given the highly stressed mar­ket en­vi­ron­ment," said Fred­erik Du­crozet, an econ­o­mist at Credit Agri­cole.

Sep­a­rate fig­ures showed that the un­em­ploy­ment rate across the eu­ro­zone rose by 0.1 per­cent­age point - the first in­crease in six months - to 10.1 per­cent dur­ing Oc­to­ber fol­low­ing an 80,000 rise in the num­ber of un­em­ployed to 15.95 mil­lion. The un­em­ploy­ment rate in the eu­ro­zone is at its high­est since 1998, even though the rate in Ger­many, Europe's biggest econ­omy, has fallen from 7.5 per­cent to 6.7 per­cent in the last year.

Though Ger­many is man­ag­ing to boost em­ploy­ment lev­els on the back of a buoy­ant econ­omy, oth­ers like Spain, with an un­em­ploy­ment rate of 20.7 per­cent, are barely grow­ing at all.

An­a­lysts said in­fla­tion would likely re­main be­low the ECB's tar­get given that un­em­ploy­ment will likely re­main el­e­vated as gov­ern­ments across the eu­ro­zone en­act aus­ter­ity mea­sures in an at­tempt to get a grip on their pub­lic fi­nances. -PB News

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