Eurozone November inflation stays at 1.9 percent
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