Eurozone inflation creeps to 0.4%

Published: Friday 31st October 2014 by The News Editor

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Inflation crept higher in the 18 countries that use the euro in October – but the rise to an annual 0.4% offered little relief to the European Central Bank as it tries to boost a weak economy.

The rise from the previous month’s 0.3% rate, as reported today by Eurostat, was in line with market expectations.

The European Central Bank (ECB) is under pressure to introduce more drastic stimulus measures in coming months to boost the ailing eurozone economy, which is suffering from too low inflation and growth.

There are fears the eurozone could even fall into outright deflation, a crippling downward price spiral. The fall in the core inflation rate is likely to add to those concerns.

The core rate, which is closely monitored by the ECB as it excludes volatile food and energy prices, fell to 0.7% from 0.8%.

Enacting further stimulus measures is complicated by opposition in Germany, the eurozone’s largest and most influential member. ECB president Mario Draghi has said the bank is willing to 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.

The US Federal Reserve has just come to the end of such a bond-purchase programme, known as quantitative easing, or QE.

The ECB is already conducting a smaller-scale bond purchase programme 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. The eurozone economy showed zero growth in the second quarter, and lending to companies remains subdued.

The bank’s goal is to keep inflation just below 2%.

Separately, Eurostat said unemployment across the eurozone was unchanged at 11.5% in September.

Published: Friday 31st October 2014 by The News Editor

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