Eurozone inflation remains at 3% in October, above the European Central Bank's 2% target, underscoring expectations that ECB would keep interest rates unchanged at its meeting this month
October 31, 2011
– Inflation in the 17 countries that use the euro remained at 3 percent in October, official figures showed Monday, likely reinforcing market expectations that the European Central Bank will keep interest rates on hold at its monthly policy meeting this week.
The rate published by Eurostat, the EU's statistics office, remains above the ECB's target of keeping price rises just below 2 percent on an annual basis. It was also higher than anticipated -- most economists thought it would ease to 2.9 percent.
The news comes on Jean-Claude Trichet's last day as president of the ECB. He is to be replaced Tuesday by Italian Mario Draghi.
Though no breakdown on the figures was available, most analysts think that higher energy and food costs will again have been the main factor behind the above-target rate. Both are expected to ease in coming months and that should start getting inflation lower.
On Thursday, the ECB is expected to keep its main interest rate at 1.5 percent even though economic growth is faltering in many of Europe's top economies, such as Germany and France, and contracting in weaker countries like Greece and Portugal.
"We think the ECB's governing council will consider the case for a rate cut in November, but ultimately decide to ease policy by 50 basis points (to 1 percent) in December, once the near-term inflation hump is behind and once there is further evidence that Q4 GDP growth in the euro area will be anaemic at best," said Gustavo Bagattini, European economist at RBC Capital Markets.
Separate figures from the statistics office also revealed that unemployment in the eurozone was 10.2 percent in September, up 0.1 percentage point from the previous month. The rise came after a 188,000 increase in the number of jobless, the biggest rise for two years.
The unemployment rate in the eurozone is now at its joint equal highest level since the euro was introduced in 1999. It last hit 10.2 percent in June 2010.
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