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Euro Zone Inflation Stays Low; Joblessness Remains High Euro Zone Inflation Stays Low; Joblessness Remains High
(about 1 hour later)
PARIS — Inflation in the euro zone remained stuck at a very low level in February, while the jobless rate was unchanged in January, official reports showed Friday, providing the European Central Bank with crucial data before its monetary policy meeting next week.PARIS — Inflation in the euro zone remained stuck at a very low level in February, while the jobless rate was unchanged in January, official reports showed Friday, providing the European Central Bank with crucial data before its monetary policy meeting next week.
Consumer prices in the 18-nation euro zone rose 0.8 percent in February, unchanged from the revised figure for January, Eurostat, the statistical agency of the European Union reported from Luxembourg. The “core” inflation rate, which excludes energy and food prices, ticked up to 1.0 percent from 0.8 percent in January.Consumer prices in the 18-nation euro zone rose 0.8 percent in February, unchanged from the revised figure for January, Eurostat, the statistical agency of the European Union reported from Luxembourg. The “core” inflation rate, which excludes energy and food prices, ticked up to 1.0 percent from 0.8 percent in January.
The January jobless rate for the euro zone remained at 12 percent, Eurostat reported. For the full European Union, made up of 28 nations, the jobless rate stood at 10.8 percent, also unchanged.The January jobless rate for the euro zone remained at 12 percent, Eurostat reported. For the full European Union, made up of 28 nations, the jobless rate stood at 10.8 percent, also unchanged.
The numbers contrast with the United States’ jobless rate of 6.6 percent in January.
The numbers were largely in line with market expectations, and financial markets reacted calmly. The Euro Stoxx 50 index slipped about 0.1 percent in late morning trading, while the euro gained 0.2 percent against the dollar, reaching $1.3730.The numbers were largely in line with market expectations, and financial markets reacted calmly. The Euro Stoxx 50 index slipped about 0.1 percent in late morning trading, while the euro gained 0.2 percent against the dollar, reaching $1.3730.
Officially, the euro zone has been gradually recovering since early 2013, its economy growing at a 1.1 percent annualized rate in the fourth quarter. Olli Rehn, the European commissioner for economic and monetary affairs, estimated on Tuesday that the currency bloc would grow by 1.2 percent in 2014.Officially, the euro zone has been gradually recovering since early 2013, its economy growing at a 1.1 percent annualized rate in the fourth quarter. Olli Rehn, the European commissioner for economic and monetary affairs, estimated on Tuesday that the currency bloc would grow by 1.2 percent in 2014.
That growth is too weak to make much of a dent in the region’s record joblessness, however, and Mr. Rehn said that he expected the euro zone jobless rate to tick down only to 11.7 percent by next year. Eurostat said Friday that 26.2 million people across Europe are currently classified as unemployed, including more than 5.5 million young people.That growth is too weak to make much of a dent in the region’s record joblessness, however, and Mr. Rehn said that he expected the euro zone jobless rate to tick down only to 11.7 percent by next year. Eurostat said Friday that 26.2 million people across Europe are currently classified as unemployed, including more than 5.5 million young people.
The jobless rate varies widely between countries. Austria, at 4.9 percent, and Germany, at 5.0 percent, are the lowest in the European Union. But Spain, at 25.8 percent, and Greece, at 28 percent in December (the latest data available), are both experiencing depression level unemployment.The jobless rate varies widely between countries. Austria, at 4.9 percent, and Germany, at 5.0 percent, are the lowest in the European Union. But Spain, at 25.8 percent, and Greece, at 28 percent in December (the latest data available), are both experiencing depression level unemployment.
In Italy, where the new government of Prime Minister Matteo Renzi is grappling with political turmoil and a stagnant economy, the jobless rate rose to 12.9 percent, the highest in decades, from 12.7 percent in December.In Italy, where the new government of Prime Minister Matteo Renzi is grappling with political turmoil and a stagnant economy, the jobless rate rose to 12.9 percent, the highest in decades, from 12.7 percent in December.
The reports Friday were two of the last important pieces of economic data the European Central Bank will have to work with before its policy board meets on Thursday. The central bank is concerned that, with unemployment depressing demand, extremely low inflation could ultimately bring on a debt spiral that hurts borrowers and already-weak banks.The reports Friday were two of the last important pieces of economic data the European Central Bank will have to work with before its policy board meets on Thursday. The central bank is concerned that, with unemployment depressing demand, extremely low inflation could ultimately bring on a debt spiral that hurts borrowers and already-weak banks.
“Overall, we see the euro area’s economic recovery gradually taking hold, albeit at a slow and uneven pace,” Mario Draghi, the president of the European Central Bank, said in a speech Thursday in Frankfurt.“Overall, we see the euro area’s economic recovery gradually taking hold, albeit at a slow and uneven pace,” Mario Draghi, the president of the European Central Bank, said in a speech Thursday in Frankfurt.
Mr. Draghi expressed concern about the low level of prices, but added, “we are clearly not in deflation,” a condition he defined as “a self-reinforcing fall in prices that is broad-based across items and across countries.”Mr. Draghi expressed concern about the low level of prices, but added, “we are clearly not in deflation,” a condition he defined as “a self-reinforcing fall in prices that is broad-based across items and across countries.”
Jörg Krämer, the chief economist at Commerzbank in Frankfurt, predicted before the release of the data Friday that the central bank next week would cut its main interest rate target, which currently stands at a record low 0.25 percent. Rolf Campos, an assistant professor of economics at the University of Navarra, Spain, said that the rebound in core prices might reassure the central bank, making it feel “less pressed to do something to prevent undershooting” its target of keeping prices rising at a level of just under 2 percent.
Low core inflation across the euro zone and weak bank lending support the case for cutting interest rates, Mr. Krämer wrote in a note. Still, with growth slowly picking up, it would probably be a close call, he noted. The concerns over deflation may be overstated, he added, as “low inflation rates are actually showing that the healing process has begun in the European periphery.”
“Most E.C.B. Governing Council members have tried to keep all options open for the March meeting,” he wrote, “and it is therefore uncertain as to whether a majority of E.C.B. Council members attach more weight to the factors supporting a further rate cut.” Jörg Krämer, chief economist at Commerzbank in Frankfurt, had predicted before the data was released that the European Central Bank would cut its main interest rate target, currently at a record low of 0.25 percent, when it meets next week.
But the inflation report “weakens the position of the doves in the E.C.B. governing council,” he said after the Eurostat report. “The decision on interest rates on Thursday is therefore quite open.”
Central bank officials may decide to find another way of providing monetary stimulus, he said, perhaps by using technical measures to increase money supply, while allowing the central bank to hold the interest rate weapon in reserve.