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Eurozone inflation stable, eases pressure on ECB

February 28, 2014

BRUSSELS (AP) — The inflation rate in the 18-country eurozone held steady in February, against analysts’ expectations of a further slide that would have put more pressure on the European Central Bank to ease monetary policy.

Inflation was an annual 0.8 percent, according to the Eurostat agency. While that leaves it below the European Central Bank’s target of around 2 percent, it will ease immediate concerns that the currency union is sliding into deflation, a sustained drop in prices.

Deflation can choke off growth as consumers and businesses delay purchases in hopes of getting better bargains down the line, and can be very difficult to get out of.

Economists were forecasting a dip to 0.7 percent, so Friday’s figure suggests the ECB is unlikely to loosen its monetary policy further at its rate-setting meeting next week.

“Stable eurozone consumer inflation ... eases pressure on the ECB to take further stimulative action,” said analyst Howard Archer of IHS Global Insight.

A closer look at the figures show the core inflation rate — which excludes the price of energy, food, alcohol and tobacco — rose to 1 percent from 0.8 percent.

Still, Jonathan Loynes, an analyst at Capital Economics, said the long-term trend remains one of low inflation, and that investors should not rule out further ECB action, particularly as economic growth remains subdued.

The ECB could trim its benchmark interest rate, which is at a record low 0.25 percent, or provide some form of boost to the amount of money in the financial system.

The weak state of the economy was highlighted in separate figures showing the eurozone unemployment rate remained at a near-record 12 percent in January. Some 19.175 million were without a job across the eurozone, or 17,000 more than in December. The jobless rate has held steady since October.

The unemployment rate for the wider 28-nation EU — which also includes members like Britain and Poland who don’t use the euro currency — has remained stable since October at 10.8 percent, Eurostat said.

The Europe-wide statistics hide huge differences between economies. The unemployment rate is lowest in Austria and Germany at around 5 percent and stands at about 26 percent in Spain and 28 in Greece.

Youth unemployment, meanwhile, edged down marginally across Europe. The rate of jobless for those aged under 25 in the eurozone fell by 0.1 percentage points to 24 percent, a drop of 87,000. In the wider EU, the rate fell from 23.7 percent to 23.4 percent.

Youth unemployment was highest in Greece and Spain, where almost six out of ten under 25 are jobless, and lowest in Germany with a rate of only 7.6 percent.


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