Eurozone inflation edged slightly higher last month, but economists warned it would provide little relief for policymakers attempting to ward off deflation in the single currency bloc.
Annual inflation increased to 0.4 percent from 0.3 percent in September, according to a first estimate by Eurostat, the EU statistics agency, remaining well below the European Central Bank’s target of close to, but below, 2 percent.
It was nudged up by higher prices in the services sector, higher food, alcohol and tobacco prices, and a smaller fall in energy prices compared with September.
However, core inflation, which strips out volatile items including energy and food, fell to 0.7 percent last month from 0.8 percent in September.
ING economist Martin van Vliet said the slight rise in headline inflation did little to take the pressure off policymakers at the European Central Bank (ECB).
“The low core inflation reading for October will reinforce concerns about deflationary risks in the eurozone and hence keeps pressure on the ECB to take further stimulative action,” Van Vliet said.
“Given the recent, sharp drop in commodity prices, we do not expect the food and energy component to provide further upward pressure to the headline rate in coming months n if anything, renewed downward pressure may be in the pipeline,” he said.
“Against this backdrop and with eurozone economic growth lackluster, the ECB will likely remain under pressure to do more to steer inflation back to their target,” he added.
The ECB has taken action in recent months to breathe some life back into the flagging eurozone economy and prevent a damaging deflationary spiral, where businesses and consumers put off purchases with the expectation that prices will fall further.
However, the central bank has so far stopped short of creating money to make large-scale purchases of government bonds.
The eurozone unemployment rate was unchanged at 11.5 percent in September, a separate report from Eurostat showed.
The number of people out of work fell by 19,000 over the month, to 18.35 million.
Germany had the lowest jobless rate at 5 percent, while Greece and Spain had the highest rates at 26.4 percent and 24 percent respectively.
Howard Archer, head European and UK economist at IHS Global Insight, said despite the drop in the number of unemployed people in September, unemployment fell at a slower rate in the third quarter than the second.
“Eurozone unemployment continued to fall in September, but there are hints that recent stuttering economic activity and more fragile business confidence has — temporarily at least — slowed already very limited improvement in labor markets,” he said.
As the eurozone is easing monetary policy to ward off deflation, Russia’s central bank raised its key interest rate to 9.5 percent from 8 percent in an attempt to address a sliding ruble and tackle inflation.
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