LONDON – Welcome news on inflation and unemployment Friday could ease pressure on the European Central Bank to act again next week to shore up the 17-country eurozone economy. But they do little to ease longer-term worries over the recovery.
Eurostat, the EUs statistics office, said unemployment was down for the first time since early 2011 and that inflation edged higher in November, dampening fears that the eurozone is about to face a debilitating period of falling prices, also known as deflation.
The inflation rate rose to 0.9 percent in the year to November from Octobers 0.7 percent, slightly ahead of market expectations for a 0.8 percent increase.
Still, inflation remains well below the banks target of just under 2 percent. It was a sharp fall in October to a near four-year low that spurred the central bank this month to cut its main interest rate to a record low of 0.25 percent.
The fall in inflation had raised fears of deflation, a protracted fall in prices that can cause a slide in consumer spending as individuals put off purchases in the hope of getting better bargains. Deflation has blighted Japans economy for the best part of two decades.
Fridays figures will likely convince the bank to hold rates unchanged at its monthly policy next week, especially as a separate survey pointed to a turning point in the labor market.
Frederik Ducrozet, an economist at Credit Agricole, said the rise in inflation should buy the ECB more time to decide whether or not to provide more accommodation.
Separately, Eurostat said unemployment across the eurozone eased from Septembers record high of 12.2 percent to 12.1 percent in October.
That was the first decline in the rate since February 2011 but still compares unfavorably with the equivalent U.S. rate of 7.3 percent.