Eurozone inflation stuck at 0.2 per cent raising chance of ECB action

Eurozone inflation remained at 0.2 per cent in August, a new estimate showed Wednesday, with analysts predicting that this could put pressure on the European Central Bank to take further stimulus action as early as next week.

The figure is far below the Frankfurt-based bank's annual inflation target of just below 2 per cent. Eurozone inflation has hovered around the 0-per-cent mark for months.

The ECB has cut interest rates to historic lows and launched a monthly 80-billion-euro (89.3-billion-dollar) bond-buying programme as part of its efforts to fire up the 19-member eurozone economy and head off the risks of deflation.

Analysts had expected the preliminary inflation figure for August to rise to 0.3 per cent. Instead it stayed level with the previous month, according to the EU statistics agency Eurostat.

This "boosts the case for more monetary easing from the ECB," said Stephen Brown, an economist at the Capital Economics think tank, noting that such a move could come at the bank's next meeting on September 8.

ING Bank analyst Bert Colijn said it was "unlikely" that the ECB would act next week already. But he said a drop last month in core inflation - which excludes volatile goods such as food and energy - would be "alarming to ECB governing council members."

European officials have argued that external factors such as oil prices have kept rates low, rather than across-the-board drops in price levels.

Energy prices showed signs of recovery in August, decreasing by 5.7 per cent compared to a previous rate of 6.7 per cent. Meanwhile, prices rose for food, alcohol and tobacco products, as well as for services and non-energy industrial goods.

Eurostat also published July's unemployment figures for the eurozone, which stood at 10.1 per cent for the fourth consecutive month, the lowest level in five years.

The eurozone has made some progress in whittling down its jobless rate since it hit a record 12.1 per cent in 2013, but many still consider it to be unacceptably high.

In the wider, 28-country European Union, unemployment remained unchanged at 8.6 per cent, its lowest rate in more than seven years.

Last update: Wed, 31/08/2016 - 15:55

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