Euro inflation creeps up, central bank still under pressure

FRANKFURT, GERMANY>> Inflation crept higher in the 18 countries that use the euro in October — but the rise to an annual 0.4 percent offered little relief to the European Central Bank as it tries to boost the economy.

Inflation was up from 0.3 percent the month before. The figure announced Friday by EU statistics agency Eurostat was in line with market expectations but remains way below the bank’s goal of keeping inflation just below 2 percent.

The chronic weak inflation figures underline the pressure on the ECB to enact more stimulus measures, especially after the Bank of Japan surprised markets with its decision to extend its bond-purchase program as it tries to boost inflation and promote growth. But German opposition may keep the ECB bank from acting unless the eurozone economy starts looking even worse than it does now.

The eurozone showed no growth at all in the second quarter, and low inflation from weak demand for goods is one sign of that weakness. There are fears the eurozone could even fall into outright de- flation, a crippling downward price spiral that could further weigh on growth as consumers delay spending in anticipation of cheaper products down the line.

While the overall inflation figure rose modestly, the core rate, which excludes volatile food and energy prices, fell to 0.7 percent from 0.8 percent. That’s a sign that the economy and underlying price pressures are weak.

Economist Christian Schulz at Berenberg bank in London said the increase in headline inflation “provides only limited reassurance,” although “alarm bells may be ringing a little less loudly” at ECB headquarters in Frankfurt.

“The latest economic rough patch may further delay the long-expected gradual rebound in inflation and will probably trigger more discussions about further easing at the upcoming meetings.” The ECB’s governing council meets Thursday but analysts say the bank is unlikely to take further action then.

ECB President Mario Draghi has said the bank is willing to take further stimulus measures if the outlook worsens. The ECB could start large-scale purchases of financial assets such as government bonds, a step which can pump newly created money into the economy and raise inflation and growth. But doing more is complicated by opposition in Germany, the eurozone’s largest and most influential member.

The ECB is already conducting a smaller-scale bond purchase program aimed at easing the flow of credit to companies. It is buying bonds made up of bundles of bank loans — a step it hopes will encourage more loans. It has also cut its benchmark interest rate to near zero and is offering ultra-cheap loans to banks tied to their lending to businesses