The recent spike in oil prices could open the way for the European Central Bank to revise up its inflation forecast when it meets this week.
Analysts expect ECB chief Mario Draghi to unveil higher inflation projections for this year and 2017 at a press conference set for Thursday, despite data released Tuesday underlining the subdued state of consumer prices and the jobs market in the 19-member eurozone.
Draghi is not expected to announce any new measures on Thursday after the ECB launched in March a bold package of steps aimed at spurring both economic growth and inflation, including lowering the bank's benchmark refinancing rate to zero.
"Thursday's ECB meeting is unlikely to bring any new policy announcement, as the central bank is squarely focused on implementing the measures announced in March," said Marco Valli, chief eurozone economist for Italy's Unicredit.
"For the first time in a long while, the ECB will probably publish this week upward revisions to its CPI projections," Valli said. The bank is also set to release new economic growth forecasts.
This week's ECB meeting in Vienna will also coincide with an OPEC gathering in the Austrian capital.
The cartel's meeting comes in the wake of a rebound in oil prices, with the global benchmark, Brent crude, breaching the key 50-dollars-a-barrel mark last Thursday for the first time since November.
But Tuesday's data released by the European Union's statistics office, Eurostat, showed annual inflation in the eurozone remained stuck below zero for a second consecutive month in May.
Consumer prices inched up to minus 0.1 per cent from minus 0.2 per cent in April, according to the Eurostat preliminary estimate, despite the ECB's concerted efforts to push the inflation rate back up to its annual target of just below 2 per cent.
At the same time, Eurostat said unemployment in the eurozone remained unchanged in April at 10.2 per cent, its lowest level in nearly five years after it hit a record 12.1 per cent in 2013.
"Together, the latest eurozone figures support broader evidence suggesting that the economy is still growing too slowly to use up the slack in the labour market and hence put meaningful upward pressure on inflation," said Jonathan Loynes, chief European economist at Capital Economics. "The ECB therefore has more work to do."
The number of people out of work in the eurozone did decrease by 63,000 from March to April, but the drop was not enough to alter the unemployment rate, Eurostat said. Analysts had expected it to remain unchanged.
Still, the seasonally adjusted jobless rate is now at its lowest level since August 2011, with a total of 16.4 million people out of work in the currency bloc in April.
With consumer prices hovering around zero for months, the eurozone has been dogged by fears of deflation.
But European officials have argued that the negative rates seen so far have not been driven by an across-the-board drop in price levels, but rather external factors such as oil prices.
The May drop continued to be driven by energy prices, Eurostat said. They fell 8.1 per cent on the year, after dropping 8.7 per cent in April. This was offset by gains in prices for food, alcohol and tobacco products, as well as for services and non-energy industrial goods.
Tuesday, May 31, 2016 - 11:05
Thursday, June 2, 2016 - 14:27