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June 1, 2017

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Eurozone posts lower inflation of 1.4% in May

EUROZONE inflation slowed to a lower than expected 1.4 percent in May, as volatile energy prices sapped the intended effects of the European Central Bank’s massive stimulus plan, EU data showed yesterday.

Eurozone unemployment in April kept an encouraging trend, inching lower to 9.3 percent, at its lowest rate since March 2009, Eurostat said.

The fall in inflation will provide backing to ECB head Mario Draghi, who on Monday said the central bank remained “firmly convinced” it must maintain its massive interventions in the eurozone economy to avoid undermining a gathering recovery.

Analysts at Factset had expected 1.5 percent inflation after prices jumped 1.9 percent in April. Factset had predicted no change for eurozone unemployment in April.

Inflation is a key indicator of underlying consumer demand and the ECB works toward a 2.0 percent target with the aim of ensuring a modest but sustained increased in prices, the sign of a healthy economy.

To achieve this, the ECB has set interest rates at historic lows, offered cheap loans to banks, and buys tens of billions of euros in bonds each month.

But an accelerating eurozone recovery and a spike in inflation earlier this year strengthened voices within the ECB for an end to the bond-buying, especially from powerful Germany, which sees it as an unfair subsidy to overspending eurozone partners.

Observers are looking to next week’s ECB council meeting for hints that the end is on the way, although most believe any concrete action to wind the programme down is still months away at least.

During the worst of the debt crisis, unemployment in the single currency bloc peaked at 12.1 percent with 19.3 million people looking for work in April 2013.

Last month, the number of unemployed stood at just over 15 million, according to the Eurostat.


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